These days it seems like everyone could use a bit of financial advice.
In the wake of the Great Recession, if you're not part of the 1%, you're likely feeling the pinch. Everyone has their own individual cause for financial stress, whether it be student loans, trying to rebuild credit, or dealing with adult kids who have moved back into the home.
Most of those in a financial rut likely wonder what they can do to break free. Like so many other things, a defined plan, followed by massive action, is all that is needed to break out of the rut.
Sounds easy right?
Here we will take a look at some steps you can take to take charge of your financial life:
Confront Your Demons
The first step to taking control of your financial life is to confront your demons. This means getting everything out in the open, including all liabilities, expenditures and all sources of income.
While this may seem like a relatively easy process, many will find that as they research their liabilities and expenditures, they will run into a certain amount of internal resistance to being real with themselves. For example, many people underestimate their monthly grocery expenses.
Instead of admitting that they spend 600 to 700 dollars per month, they prefer to pretend that their expenditures are only 200 to 300 dollars per month. Other people would rather not consider how to pay off old debts which have gone into collections.
But, in order to take charge of your financial life, you must be honest and write down all of your current expenses, liabilities and income sources.
Make a Budget
Once you have written down all of your expenses, liabilities, and income, it is time to make a budget. Once again, making a budget requires absolute honesty.
In order to make your first budget, simply write down all of the expenses you typically spend money on every month and all of your income. Your first budget is not meant to be your ideal budget.
However, it is meant to show you how you are currently spending your money.
Revise Your Budget and Be Sure to Pay Yourself
After making your initial budget you should revise it by reducing unnecessary expenditures and eliminating all expenses which are not absolutely essential to the functioning of your household.
You will likely get a tremendous sense of power while performing this exercise, even though it may be scary to eliminate, at least in theory, much of your discretionary spending. But it is necessary. Any left over money should go to reducing your debt load.
One very important part of your revised budget should be paying yourself. This means that the first 10% of your gross income should go to saving or investing for your future.
Though this may seem impossible at first, you'll soon find that dedicating this 10% to paying yourself first actually gives you the confidence and assurance needed to stick to the rest of your revised budget.
Commit To Following Your Budget
It's one thing to make a budget. And it's another thing to make it work.
In order for your budget to help you take control of your financial life you must commit to it and stick to it.
The only way out of a financial rut is to do something different from what you've been doing. By making a workable budget, and following it, you will be taking the first steps toward truly being in control of your financial future.
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