Do you struggle to get motivated to improve your personal finances?
When it comes to goal setting, my financial goals are probably at the bottom of the list in terms of overall excitement. Of all the goals on my whiteboard, it’s always the last one to get crossed off. Does that sound like you, too?
That’s not to say our financial situations are not important, because out of any goals we might have, finances are probably most important. But, if you’re like me, your fitness goals, career goals, or side hustle goals are probably so much more exciting and there’s only so much energy to go around.
If you’re struggling to get excited about improving your personal finances, I’ve assembled a list of 5 simple steps to help get you going in a single afternoon.
Are you ready? Let’s do this!
1. Review Your Fixed Monthly Expenses
Technically, this is the first step towards starting a budget, but let’s not get ahead of ourselves; we’ll cover budgeting a little further down the page. For now, print out your past 2-3 months of checking statements and take note of all of your recurring bills. These can include:
- Mortgage/Rent
- Utilities/Electric/Gas
- Insurance
- Subscriptions/Memberships
- Cell Phone
The key here is to assemble a list of all of your recurring bills so that you can evaluate them and plan for them in the coming months. In addition to your big bills such as rent, utilities, and groceries, this also includes fun stuff like Netflix, Hulu, or any other entertainment or recreational bill.If it’s recurring, add it to your list.
Don’t worry too much about the exact amounts here. If the amount never changes, such as your rent or mortgage, great! If it changes a little month to month, like gas, just ballpark an average to work with.
Countless people have recurring bills that they’ve totally forgotten about, so this list is vital to your financial goals going forward. I once signed up for Xbox live and didn’t play it for 11 months after signing up. Whoops.
2. Evaluate Your Extra Spending
Alright, now that you’ve combed through the last 2-3 months worth of checking statements, you should have a pretty good list of your fixed monthly expenses, but we’re not done with your statements just yet.
omb back through your statements one more time and this time, look for expenses that come from restaurants, grocery stores, coffee shops, gas stations, etc. You might create a few categories on a sheet of paper and start noting all of those expenses.
If they seem to rack up quite a bit, don’t fret and DON’T beat yourself up. We all fall prey to mindlessly spending money on Triple Venti Pumpkin Lattes….or is that just me?
All jokes aside, if you haven’t been tracking your finances, I would expect your spending on food, eating out, and entertainment to be pretty high. However, now that you know where your money has been going, you can begin to plan where it goes from now on.
Don’t get discouraged, because if you think about it, the more money you’ve been wasting on extra spending, the faster you can build some savings or paying down debt, assuming you start budgeting.
Pro Tip
Deleting apps like Starbucks or food delivery apps such as Uber Eats can help save some money. These apps make it all too easy to spend the extra dough. I fell into this trap and found myself eating out way more often, and I was reloading my Starbucks app almost weekly. I’m already saving around $150 per month!
3. Total Up Your Debt
If you’re starting to feel a little blue, please hang with me, because it gets better!
Before we can chart our path to improving our personal finances, we have to access our financial situation. That includes totaling up our debt.
Some of us are going to have more debt than others. Perhaps you went a little overboard with your department store credit cards, or maybe you’re knee deep in student loan debt. Whatever your situation, you need to list out all of your debts.
If you’re looking for the easiest way to do this, I have a post that will walk you through the entire process using some free online resources that you can read here.
Totaling up your debt is going to help set your financial goals in the next step. Are you going to focus on debt reduction, saving an emergency fund, or investing for retirement? It all depends on how much debt you have.
4. Set a Financial Goal
I encourage you to make your financial goals your own, after all, it is personal finance!
If you have a great deal of debt, I would set a debt reduction goal using the debt snowball, but if your debt is pretty low or you don’t have any debt at all, I would set a savings goal.
Either way, your goals should be Specific, Measurable, Achievable, Relevant, and Time-bound. Here’s an example: “I want to save $200 per month for a total of $2,400 in a year.”
It’s very specific and measurable. Depending on your finances, it’s probably attainable. If saving an emergency fund is your goal over debt reduction, then it’s relevant. And, it has a deadline, so it’s time-bound.
Once you know what your goal is, you need to create a plan of action for achieving it. When it comes to finances, a plan for your money is best laid out in a budget, and I can help you start one right now.
As a matter of fact, if you’ve done these first four steps, your nearly finished.
5. Start a Budget
Since we’ve already laid the groundwork for a budget, we may as well go ahead and build one out. If you want a quick-start budget template, I’ve got you covered here, or you can build your own from scratch, but I’d download my awesome template if I were you.
So far, you’ve already listed your recurring monthly bills and evaluated your extra spending, so now you need to decide how much extra spending you’re going to reallocate towards your new financial goal and you need to add your income into the equation.
Once you add up your monthly income and subtract your fixed monthly bills, how much money do you have left and of that amount, how much do you want to save or put towards your goal?
Work Backward from Your Goal
It’s important to work backward from your desired savings or extra debt payment. If you’re unfamiliar with the Law of Consumption, it states that the amount of money we spend on consumption rises with our income. An excellent example of this might be if you get a $200/month raise and suddenly want a new car. The Law also states that the amount we spend tends to rise more than the amount we earn, which is a recipe for debt.
This is why you should work backward from your goal.
If you make $2,000 per month and want to save $200, then you only have $1,800 to work with in your budget. If a quick review of your fixed monthly payments reveals that you need $1,500 for your bills, then you only have $300 left over for extra spending, which includes eating out, entertainment, etc.
Many people do this backward. They look at their income ($2,000) and then subtract their fixed monthly expenses ($1,500) and then review their extra spending ($500) and decide they don’t have enough money for savings. Please don’t do this! If your goal is important to you, then you should be able to make room for it in the budget.
Start with your end goal in mind and then adjust your budget to make it work and you’ll be well on your way to improving your personal finances in no time! Don’t forget, creating a budget isn’t meant to be restrictive – it should be freeing.
Once you have a budget, you can work your way towards being debt free, which is the best form of freedom a person can have.
