Where to Begin When You Don’t Know Where to Begin
So what’s the most common thing I hear among financially frustrated friends, family, and clients? Other than, “you have something stuck in your teeth,” it’s always some variation on this sentence: “I don’t even know where to start.”
Usually people will say this when they feel overwhelmed, confused, and truly unsure of how to start the journey toward financial independence.
So what’s the answer then? Normally I say, “it depends”, because it really does, but I don’t want you to start throwing tomatoes and booing me, so I’ll try to give a generally applicable answer.
I believe the best place to start regaining control of your money is by taking inventory. First, make a list: everything you own vs. everything you owe. Then make another list: all the income you make in a month vs. all the money you spend in a month. Really break these lists down as much as you can. The more specific the better. Categorize assets and liabilities (separately list all your accounts, your home’s value, your types of student loans, credit cards, etc.) Do the same thing for your income and expenses lists. Why spend the time and effort to write all this down or put it in a spreadsheet? It’s going to paint a clearer picture of your overall financial situation. It’s also going to get you on the path to organization. Finally, it’ll make it easier to come to decisions regarding a financial plan for the future.
The Truth Hurts
So what comes next? Another writing task for you. Write down your biggest financial pain points. Is it student loans? Credit card debt? Overspending? Don’t write, “I don’t have enough money”. That’s not going to solve anything. Why don’t you have enough money? Are your bills overwhelming? Is your housing too expensive? Are your transportation costs eating away at your budget? Take the time to figure out what’s costing you the most. Here’s the difficult part. You’re going to need to be your own biggest critic. What are you wasting money on? There’s a huge difference between things we actually need and things we really really want. Be brutally honest with yourself and your wasteful expenditures. Again, list them!
Set Your Sights High
So how do you make lasting and positive financial change? You need a plan, ya goober. First you need goals. Short-term goals, intermediate-term goals, and long-term goals. I’ve talked about setting Specific, Measurable, Attainable, Reasonable, and Time-Based goals before. Write them down.
Now figure out what you can do today, this week, this month, and this year in making changes. If you cancel one subscription this week, can you then apply that money to paying off a credit card or saving for a vacation? Can you pick up a couple of overtime shifts this month or cut back on lunches out?
Take It Further
So now you’re on the right path. You’ve done a great job thus far, young padawan. This is the part where it may get a little more complicated and involved. Now you need to start a savings and investing plan for the future. Begin by evaluating your work’s retirement plan. Are you contributing enough to receive your company’s match (if they provide a match)? Can you contribute more? Perhaps you should look at opening a Roth or Traditional IRA. Begin thinking about automating your savings. Choosing investments and which savings accounts to utilize for optimal results can be overwhelming. If you don’t feel confident, then do your due diligence and research what may be best for you. If you find yourself with more questions or not understanding, then you can probably guess what I’m going to recommend. Talk to a financial planner! Find someone who upholds a fiduciary standard, good ethics, and has a great reputation. A good planner will help you establish, implement, and monitor your progress in reaching financial goals.
So there you have it. A few easy steps to answer the question “I don’t even know where to begin”. Remember, as you celebrate Valentine’s Day this week, you are the Beyonce to my Adele.
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