7 Things I’m Doing Right Now To Improve My Financial Situation
Just like most folks, I don’t consider my financial situation perfect. I have some debt that I need to pay off and some goals I want to achieve. Moving forward on financial matters can seem so difficult. Saying that ‘I want to get out of debt’ is general — there’s no clear starting point. And that’s just the minor stuff: figuring out taxes can make you wish we all still relied on barter. But setting your financial house in order isn’t impossible. You just need a starting point.
These steps are my starting points. Not just any starting points, either: these are my ‘back to basics,’ ‘work on when I have no idea what else to do,’ ‘got to keep with it’ tasks.
- I set goals. My financial goals are very set things, though. They have dollar amounts and due dates, no matter what. After all, my finances are all about numbers. It just makes sense that my financial goals are the same way. I consider something along the lines of ‘I will save $500 by the end of this month for my emergency fund.’ I also think it’s crucial to know from the start what your money is for. Saving for shoes or for getting laid off is easy, but just saving is hard.
- I read. I know I don’t know everything there is to know about personal finance. I’m working on correcting that, though. Right now, I’m reading up on stocks — a subject that was not even mentioned during the one semester of financial literacy education my high school provided. Because I’m well aware of the deficiencies of my official personal finance education, I read a lot. I want to know all about different ideas, even if I don’t agree with them.
- I take my time. When it comes to a financial decision, including spending relatively large sums of money, I wait. While I might have an instinctive reaction (often along the lines of ‘Buy it! Buy it!’), I’ve found that I save a lot of money by just deciding to come back later. The same holds true on other financial decisions. Before I chose a bank, I take some time and do some research.
- I put my money out of reach. I’m lucky — I don’t have a problem resisting the urge to use my credit card. But if I have cash in my pocket, I always have a burning desire to spread the wealth around. I try to head this urge off: I don’t carry much cash. I’ve gone a step beyond that, though. Most of my savings is in an account that, while I can get my money in an emergency, I do have to jump through some hoops to make a withdrawal. Having to go through a few extra steps when I want cash makes me reluctant to spend money when I don’t actually need to.
- I improve my income. Passive income is the best thing since sliced bread. Whenever I get the opportunity to set up a passive income stream — even if it’s just a static website with Google AdSense — I do what I can to take full advantage of it. I do what I can to improve my other sources of income, as well. I negotiate for higher pay, take on side projects and generally do whatever I can to increase the amount of money I have coming in.
- I run a business. It seems like having a business would be more effort and expense than it would be worth, financially speaking. But you can effectively run a business for free, and it offers several advantages. Consider your ‘business expenses.’ If you run a blog or other computer-based business, that computer you just bought could be tax deductible. You just lowered your tax bill by making a purchase that you probably would anyway.
- I do things myself. Some instances of frugality, like making your own soap, may not improve your financial situation. It may not be worth your time to do some things yourself. But I’ve found several things to do myself that have saved me money, liking baking my own bread. Even better, if I’m doing some task I’d normally pay someone else to do, in addition to saving that fee I’m not out spending money on entertainment. Sure, it may not be cheaper for me to grow my own tomatoes, but when I’m gardening, I’m spending only a fraction of what I would at the movie theater.
There are lots of little things that we can do to tidy up our respective financial situations. It’s important to remember that it’s not an all or nothing proposition you can make progress on your financial goals without committing to complete frugality, massive saving and working every hour in the day. That sort of approach will probably only last you a few days before you break down. But if you work on just a small task or two at a time, you can make a lasting change in your approach to personal finance. Even doing something as simple as eating one extra meal at home each week can make a profound difference in your bank balance.
None of the steps I’ve listed before need to be hardcore processes. Even running a business can be something as simple as selling your old stuff on eBay. Each of these steps can be as small — or as big — of a commitment as you would like. Personally, though, I go for the light workload.
WRITER'S BIOGRAPHY
Thursday Bram
Thursday Bram is a freelance journalist of over five years experience. She studied Communications at the University of Tulsa and is currently working on her MA in Communication Design. Her work has focused primarily on entrepreneurial topics. More information about Thursday is available at thursdaybram.com.
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Comments
Writer Dad says on August 7th, 2008 at 10:32 am
#5 - super important. Out of sight may not be out of mind, but if you can’t touch it, then you can’t spend it, and if you can’t spend it, it’ll be there tomorrow.
Shanel Yang says on August 7th, 2008 at 10:39 am
One great book to read (No. 2 on your list) is Nice Girls Don’t Get Rich by Dr. Lois Frankel which I summarize key parts of in my series called “Money Lessons for Nice People” (b/c I believe there are many “too” nice males as well as females) at http://shanelyang.com/2008/04/.....self-test/
Jan Dillaha says on August 7th, 2008 at 11:17 am
Great points. The main thing here is that you are taking control. Most people just get stuck in a fog about their finances. They work, they pay the bills, but they don’t actively manage the money that they have.
A great example of this is the grocery store. We think food is a necessity and we take that as an excuse to buy whatever is on our list. When people budget for food and work the money that they have allocated for that expense we hear that people save anywhere from 20% to 50% without feeling like they are sacrificing.
Mary says on August 7th, 2008 at 12:53 pm
I am sending the link for this post to my husband. We are working toward financial freedom and I think this will give him the encouragement that small things we do are adding up. Thanks for a common sense post.
Steve Schwartz says on August 7th, 2008 at 2:26 pm
All good advice, but you must be careful with the business expenses tip. If it is truly something you would have bought anyway, it might not be as much of a writeoff as you think. The government says that it must be at least 50% for business use. So, for instance, if I buy an iPod touch, and then listen to it occasionally while I’m working, I’d probably have a hard time justifying it as an all-out business expense to the IRS.
I’m not saying you can’t write off things such as a new computer or a new car if you do in fact use them for business, I’m just saying you have to use some discretion. Being audited would not be very condusive to a wise use of time.
FrugalNYC says on August 7th, 2008 at 7:25 pm
The best point I took away from this is making small changes. BIG things can happen over time from small changes. Just look at Nature: mutations and evolution, mountains and rivers are all formed over time through very small changes. I bring my lunch to work most days, in NYC, lunch can average $7-10 on the low end. That can add up to a big savings over the long run. I’ve just posted about 10 Free things to do in NYC at http://frugalnyc.blogspot.com/.....n-nyc.html. That will save you some cash in the entertainment department.
Sam says on August 7th, 2008 at 11:40 pm
I salute you Thursday!
I think you’re in the right track. The general guide to save money and to ensure that you’re on the right financial track is to ALWAYS spend less than what you earn. It’s easy to say that but with discipline, its doable. Here are other steps you may want to do:
Step 1. Setup an emergency fund. I’m really surprised you put that one first on your list. Few people bother to save money for emergency fund, nor know what exactly it is for. Ideally you may want to target a certain goal for your emergency fund. A good target would be 6 months worth of your monthly expense. Once you reach that target, have a grand party for you have achieved that.
Step 2. Get a health insurance. If you’re employed, this should not be a problem. If you’re not employed, this is a MUST. There’s an article on my blog how you could have a better health insurance plan even if you’re not employed( eg. self-employed,freelance etc)
Step 3. For all your earnings, set aside at least 5-10% of your income to your retirement fund. Ideally, you can follow a tip from a book (Automatic Millionaire) by doing it automatically. In a nutshell, talk to your accounting dept and inform them that you want 5-10% of your income automatically deducted and transferred it to your retirement fund. You cannot spend what you cannot see as they say. By the time you’re old enough, you should be a millionaire!
Lastly, get healthy! You are your own greatest asset. Cheers!
Sam
Fix My Personal Finance
http://fixmypersonalfinance.com
Ellen says on August 8th, 2008 at 1:08 am
I think it’s useful to recognize what you can control and what you cannot. You cannot control the cost of food, for example. You can control what you eat and how you choose to spend your food budget. Cut out mixes, packages, processed foods, etc. and you’ll save a ton. Look at the grocery fliers, make a menu for the week based on the lowest prices PER SERVING, and stick to it. I’ve got a calculator on my web site to help you compare the cost per serving of different meat cuts, for example. Look past the cost per pound and see how many meals you can get out of different things. And experiment with new foods.
Sam says on August 8th, 2008 at 7:08 am
Ellen,
Thanks for the tip! I definitely find the calculator very useful!
Sam
Mark says on August 10th, 2008 at 10:36 pm
Good list. One thing I have found to be helpful is associating with people that have similar financial goals. If you want to be wealthy then seek mentorship from someone that is already where you would like to be. Learning from others experience can save a lot of time and money.
formerfire says on August 12th, 2008 at 6:24 am
i would be interested to know if you have any good links on the elusive passive income. Ones that a fair dinkum and not a scam.
moneymadness says on August 13th, 2008 at 9:37 pm
Thanks thursday, you have inspired me to turn things around. I will post day by day real data of where I am at in trying out different pieces of advice on my blog. http://moneySOS.blogspot.com
nick says on August 21st, 2008 at 10:14 pm
Lots of great tips. The neat thing about getting your finances under control is the longer you work at it, the easier it gets. Not spening seems difficult in the beginning, but pretty soon you don’t know why you were buying stuff in the first place.