Welcome to my blog! This is a pet project where I am hoping to be able to spread knowledge and improve people’s lives. Important stuff first. Why should you care and bookmark my site? *hint hint*. The content within these electronic doors will allow you to take control of your life without relying upon an expensive financial adviser. The goal of this blog is not to make you part of the FIRE movement (the Financial Independence Retire Early movement), it is to give you the tools to earn freedom. If that freedom means joining the legions of FIRE fans, or if it just means being able to go out once more a week because you’ve saved money in other places, that decision is entirely up to you.
“The first thing everyone recommends is ‘Make a budget!’. That’s not how I suggest getting started.”
So, where do you need to start?
The first thing everyone always recommends is “make a budget!”. That’s not how I would recommend getting started. My view on this is how are you supposed to know how much money to budget if you don’t know what your current spending habits are? I think the best and most realistic way to start taking control of your finances is to document your spending habits and then evaluate if those amounts could get cut back, then tracking your progress by seeing your spending decrease as you track. To do this, I always suggest starting by going to PERSONAL CAPITAL and signing up for a free account to have an easy way to track your spending (*when you first link your accounts, only the past 90 days is imported). As a bonus, if you sign up through my referral link you get $20! To start, follow the instructions and link all of your relevant accounts (add everything you can think of; savings accounts, credit cards, student loans, mortgages, etc.). Once all the accounts are synced, start browsing through the history of your transactions so you can clearly see where all of your hard earned money is actually going; large amounts may be spent in unexpected places. For example, your on-the-go $5 morning coffee sounds like such a small thing you don’t even need to consider it for saving money – except that turns into $1,820 if you have it every morning for a year. Now to me, that’s almost $2,000 that would be much better spent elsewhere.
“…start browsing through the history of your transactions so you can clearly see where all of your hard earned money is actually going.”
So once you have a good vision of where your money is going each month, and you have been able to pick out areas where you can minimize your spending, it’s time to figure out what to do with your new savings! This could be adding the new savings to a date night fund, travel budget, a savings account, or even investing that money into the stock market to turn into even more savings. Congratulations, you just successfully reclaimed your money! This does bring me to my last piece of advice for this post, however. Depending on your current financial allocations, take a look at both any “emergency fund” savings and any outstanding credit card debts you may have. Priority number one should be paying off those credit card debts (if you have them) with these newly claimed savings, because no matter what, its so important to eat away at credit card debt however you can. This is because credit card debt it usually at a very high interest rate, upward of 20%. This interest rate will destroy your finances over time. I will cover tips and tricks to escape from large amounts of credit card debt in a future article. Now, if you have already paid off your credit card debts or you didn’t have any to start with, your priority should turn to building an “emergency fund”. If you don’t have one already, I would highly recommend starting one, keeping in mind that the rule of thumb should be that this fund would represent the value of 3-6 months of your current spending habits. So now that you have studied your monthly expenses, make sure that you have 3-6 months worth saved in a savings account (I highly recommend a high-yield savings bank, such as Ally Bank – why not gain decent interest on your emergency fund?) as this money will become your rainy-day fund to help cover expenses if you ever find yourself in a situation where your income is unreliable. There are other options for this money, which can facilitate even greater returns than a high-yield savings account but I will cover those in later articles!
When you feel that you have mastered these beginning steps, it’s time to move on to other steps to help set yourself up in the future or find ways to maximize the money you have now. If you found this information helpful, be sure to read my next post (coming soon!) to learn more. I also highly encourage you to reach out to me (at my email on the contact page) with any questions or comments you have, as I would love to make this an interactive blogging experience. Thank you for reading, and good luck starting your journey to claiming control of your finances!