You are determined to get your financial house in order. I don't need to wish you luck, because you don't need it. What you need is a sound plan and a budget in place.
1. Time for the reckoning:
- As painful, embarrassing, and possibly emotionally devastating as it might be, you need to know exactly what you owe and who you owe it to. Do not go out and buy some unnecessary fancy budgeting software. You don't need it. What you need is a piece of paper and a pen. Go through your house and find all of your bills. This is probably a good time to give the house a good clean. Gather up the bills and stick them in one place. When you have all of what you owe in one place take that pen and paper and start writing down the totals one by one. Add it up. Feel free to have a moment of despair if you so desire or a moment of joy if it's really not that bad after all.
- Figure out how much you are bringing in. This is your income from all sources. If people owe you money, this might be a good moment to start calling in those markers.
- Figure out what you have to live on. This is the amount after your rent/mortgage has been paid, your fixed expenses have been paid (gas, electricity, telephone, etc., etc...), your carpayment and credit card payments have been deducted and any childcare expenses are subtracted. This is what you have to work with. It may not be much so try not to despair.
2. Home truths:
- Do you really need the cellphone plan that you have? Do you? I thought I needed the plan that cost me a small fortune because I always have to be connected to the internet. Then I got smart. I realized that I spend the bulk of my day in places with free wifi access. I didn't need to pay to access Facebook in my car. I cut my plan down by about half.
- Television. Hand up, I love television. But I don't love it so much that I'm going to drop a small fortune so I can have all five million channels that are available. Be reasonable. Ask yourself do you truly need to pay for television? I conducted a small experiment last year. I dumped my pay for TV after a billing error got me so angry I told the person handling my call at the phone-farm to cancel my subscription. No more pay for TV. But what I had, was Netflix and Hulu. I realized very quickly that I didn't need to pay for TV anymore beyond my Netflix subscription which is truly nominal compared to what I was paying for cable.
- Insurance. Maybe you aren't overpaying, but then again, maybe you are. I liked my insurance agent too. I also liked my travel agent. I'm sure they're lovely people and probably could use my business. But I need my money more than they do. Shop around on-line. If you have travel insurance check to make sure you haven't doubled up. Credit cards often carry travel insurance.
- Living situation. Can you afford where you are living? Are you a single person in a four bedroom place when in fact you can live in a studio? If your financial house is in disarray, you need to cut back. And yes - this means cutting back on accommodations. A move might be cheaper in the long run than you realize.
3. Credit cards, banking and loans.
- Stop paying for bank fees. If you aren't already paying your bills by direct debit, then start. Chances are your bank waves your monthly fee if you have so many bills being paid automatically.
- Stop using your credit cards. Use cash. Cash is much much much harder to spend than handing over a credit card. It is very easy to buy a bunch of clothes you don't need with a credit card. It's much harder to do if you have to go into your wallet and count out the bills. Credit cards are for emergency only. By emergency I mean emergency. Needing a coffee is not an emergency.
- Get cash out of your bank once a month. I shall repeat that just to make certain I was clear. Get cash out of your bank once a month. That is your cash for the month. From that cash you must fill your gas tank, buy your groceries and cover all expenses. If you run out of cash then you are stuck until the end of the month. You will only need for this to happen once before you start spreading your money out a big more sensibly. If you have money left at the end of the month, please have a lovely evening out or go and buy that top you would love to have - or, even better, roll it over to the next month. Who knows... in a few months you might have enough saved up for a real treat!
- Pay off your credit cards. Pay them off. Stop charging. Pay off your credit cards. If you have any extra money and you have credit card debt, pay off your credit cards. Have I repeated this enough times? Pay off your credit cards. Do not go out and get a mocha latte extra grande for ten dollars. Pay off you credit cards. Do not buy that purse on sale. Pay off your credit cards. Do not buy new towels no matter how great the price or how grubby your towels are. Pay off your credit cards.
- Ask yourself honestly - do you need a car? Do you really need a car? Think of how much money you could say if you didn't have a car. Do you really need a car? If you can manage for six months without a car think of the money you would save (parking, gas and insurance are a lot more expensive than a bus pass). I'm not suggesting you sell your car unless you have a loan on it (or heavens forbid you've leased it! then I might have to cry for you), but I am suggesting you garage it or only take it out ONCE A WEEK to do your errands. If you need your car then ask yourself if you need the car you have. If you are paying off a loan on a car then you probably need to get rid of that car and get a car that you can pay cash for. I suggest a Pinto or a Gremlin. Yes - I am serious. A slice of humble pie might be just the thing you need. Your pride might take a hit but your bank balance will thank you. Don't buy cars with a loan. Save up money until you can buy a car with cash. Drive a beater until you can afford the car you want. One final thought - if you actually pay to have your car detailed then you are beyond my help.
4. Final suggestions.
- Stop eating out. Stop it! Learn to cook. Ingredients cost a whole lot less than a bag of gut busting garbage from the local take-out.
- Stop buying books. You can download a bucket full of books for free on Kindle. You don't need to own a Kindle to use the Kindle interface on your laptop. Or - here's a thought - go to the library.
- Clean your house. You might be shocked at what you find. Consignment shops are doing a great business thanks to the economic downturn. Get rid of some of your stuff and fill your wallet.
- Learn to do your own nails. Chances are you probably already know how to.
- Learn to pluck your own eyebrows. Chances are you probably already know how to.
Enjoy your life for free. Walk more. Read more. Eat better food. Appreciate what you have. Stress less. Life is good. Controlling your financial destiny is the greatest gift you can give yourself.