We all like to feel as though we are in control. This includes being in control of our finances. That’s why I often say that financial freedom is the best thing money can buy. When you compare any material possession or even experiences that so many people say is a better value for your hard earned money, the comfort of knowing I won’t have to worry about my financial future always win out. The question is – how do you take control of your finances today? If you want to be back in charge, you need to start taking the right steps toward financial freedom. Here are ten steps you should take to start taking control of your financial future.
Stop worrying about the “woulda coulda shouldas” if you are serious about improving your future. The good news is that it’s never too late because the earlier you start, the better off you will be. Make a commitment now and get the wheels rolling. The hardest part is always getting started. Even if you can only get the wheels to turn slowly at first, it’ll be much easier as time goes by. Can’t save $1,000 a month? Start with $100. Do you find $100 still too hard to clobber together? Even $5 is a good start. Heck, get going with $1. The key is to get started. Once you have a routine, then it’s much easier to adjust your savings higher as time goes by.
Figure Out Why You Want to Do This
The most common question I get from interviews by far is “what’s the best tip you would give someone who wants to improve their finances” and I always give the same answer. Focus on the why. And don’t just go with something generic like “I want to get out of debt.” It’s too vague. Why do you want to get out of debt? Why do you want to be financial independent? What motivates you to take control of your finance future? You have to be crystal clear about the motivation behind your goal. Once you figure it out, then you have to hang on to that motivation and levitate the reason into the North Star of your mind so you never lose sight of it.
Having that motivation to improve your situation is like having a fire lit in your belly. You won’t need tips from me then. You’ll do the research yourself. You will try things out to see what works better on your own. You will take the time to find every way to save. You’ll figure out how to invest better. You’ll have fun doing it too, because you are doing exactly what you want to do.
Why do you think people can pay off their six figure debt in a few short years? They don’t have some secret knowledge that you don’t know about. They are simply more motivated than you.
Think About Your Priorities
Once you make a commitment to get started and have the motivation to keep at it, then you need to start managing your financial priorities is to figure out what you want to accomplish. Your money is a tool, and there’s no right or wrong way to spend what you earn. It can be used to help you enjoy life and even make the world a better place. Think about what is most important to you. Would you rather travel or be able to buy a cup of Starbucks whenever you want? Does your budget allow you to do both? Figure out what you want your money to do for you in the long-term as well as in the short-term.
Once you know your priorities, then you can begin making a plan that helps you reach your goals.
Make a Plan
You should have a financial plan to help you accomplish what’s most important to you. Once you have established your priorities, you can then make a plan that helps you spend according to those priorities. Ruthlessly cut down on spending on things you don’t really care about so you can put more towards stuff you really do care about.
Make doubly sure that every dollar you are spending is actively contributing to your happiness. If not, then cut it out. Remember, every dollar you reduce is another dollar you can put towards stuff that you do enjoy.
When I cut out my cable TV subscription, I was making as much money as I ever did. It was never about whether the monthly subscription was affordable or not. I simply don’t need it, and the $100 a month I saved went straight towards my retirement fund. Just cutting out cable 10 years ago will literally help me retire weeks earlier. Now add up everything you are spending on that doesn’t really contribute to your wellness short or long term. Think of how much of a difference those could make if you eliminated all of it and put the money all towards something you truly care about.
Put together a short-term plan, a medium-term plan, and a long-term plan with goals in each. Spend some time so the goals in each plan align with each other and make logical sense. For example, you may want to save for a car or a vacation in the short term. How will that work with your plan to pay off that credit card and ultimately pay off longer term debt and saving for retirement?
Be as specific as possible. Your plan shouldn’t be just a vague statement that says you will pay off debt. It should include how much you are paying, how often, and where that money is coming from.
The more specific you can be about your plans, the easier it is to follow and the higher the chance you’ll meet your goals.
Learn to Be at Peace with the Outcome
Life is unpredictable. You do your best to follow your plan, but emergencies can sometimes knock you off track. Longer term goals will often involve an assumption of investment returns, and we all know how unpredictable that can be.
Obstacles is to be expected. Don’t ever confuse the outcome with your plan. Keep revising the specifics as time goes on. Plus, not all surprises are bad ones. Just as accidents happen all the time, you may catch a lucky break and get a good stretch of solid investment gains too. If you are in the game for the long haul, then you will get both the good and bad breaks. Expect the unexpected and keep moving forward.
No Matter What, Pay Yourself First
This is one of the most basic rules of personal finance. You should pay yourself first by investing a portion of your income for the future. Contribute to a retirement account, and make sure that you also fund your emergency savings. It’ll be tempting to help others, especially when it’s someone close like your parents or your kids.
It’s like what they say about the oxygen mask on a plane. Help yourself before you help those around you. If you take care of yourself, then you can still help others longer term. If you drown in debt, then you not only won’t be in a position to help but you’ll become a burden yourself. It’s important to put yourself first when it comes to taking control of your financial future and building up the wealth you need for your preferred future. Pay yourself first, and remember that this will put you ahead of the curve.
Diversify You Income
The truth is that you aren’t actually in control of your financial future if you rely too much on one source of income. Consider this. Even if you have a good day job, you can get fired if you are working for someone else. This doesn’t necessarily mean that you have to quit working for “the man” and start your own business. But it does mean that you should consider diversifying your income so that you aren’t relying so heavily on one source. Think about ways to diversify. Start a side hustle, build an income portfolio, and earn royalties. The more sources of income you have, the more protected you will be.
Use Technology to Stay on Top of Things
Finally, you want to stay on top of things. You can use technology to keep you on top of the situation. There are plenty of financial apps these days that make it possible to monitor your situation no matter where you are. While you don’t want to be obsessive about checking the numbers every minute of the day, you should occasionally check you situation and then adjust as needed. Make sure that you carefully and regularly review your situation and note your progress. You might need to change your debt reduction plan or adjust your asset allocation in your retirement portfolio. You wouldn’t know though if you never check.
Stay Positive and Keep Improving
Taking control of your finances is not a onetime deal. If you want to succeed, then staying in control is what you are ultimately after. The key is to stay positive, expect the unexpected and keep soldering on. There will be lows but there will always be highs in your journey. Get started, stay motivated and keep improving. You will do well!