Gaining Control Of Your Finances. Where To Start. Part One

If you’re finances are in a mess, if you feel like you’re drowning in debt, or just treading water but not going anywhere, then a website of saving tips and tricks can be overwhelming. Where do you start?

I thought that I would go through a series of steps that I hope will help you on the path of gaining control of your finances.

1. Changing Mindsets – Decide on What’s Important to YOU

I know this sounds a bit fluffy, but the first step in taking control of your finances is deciding to act. Making changes happen when we take action. Decide on your values, set some goals and make a commitment to do what is necessary to reach those goals.

What are values? Values are those things that are important to us. The things that define us. The things that we live for. Our everyday actions, our decisions, and our goals are based on these values. Everyone’s values are different. One value that is important to me is sustainable living, living in harmony with the environment. While I fall short of this value, my decisions are based on working towards this.

We live in a materialistic society. We tend to value materialistic things, outward appearances of wealth, our identity as consumers. If your goal is to save money, then these values may be counter-productive to your goals.

When you decide that you want to save money, ask yourself why. Is it because you have to? Or because you want to pay off your mortgage quickly, or go on an overseas holiday, of finance your children’s education? These are your goals, the reasons why you will make the choice to save money rather than spend it.

Write down your goals. Make them real. Make them specific. Do some calculations. How much will you need to save each week to go on that holiday? How much extra do you have to pay on that debt?

If you’re not single (and even if you are) reaching financial goals will be a teamwork effort so discuss them with your family and get their input. Ensure each member of your family has ownership of the financial goals and are working together towards achieving them. I realise this is easier said than done. But you have to try. Maybe a compromise can be achieved by balancing your goals and their goals. Friends may need to know your motivations, so that they are understanding when you suggest a less expensive restaurant, or a movie at home.

Changing your mindset also involves not thinking about money. I’m not talking about putting your head in the sand. But endlessly worrying about your finances, to the point of it consuming your life is no way to live. Monitor your finances, and then go an play with your kids or read a book and forget about them for a while.

2. Forming New Habits – Stop and Think

Evaluating your current situation, setting budget and monitoring your progress are all excellent ways to gain control of your finances, but before we do any of that, we need to make one adjustment – stop spending needlessly now!

Spending money without thinking can be a habit, and if you want to start saving, it’s a habit that needs to be challenged. A good way to break the habit is to put stickers on credit cards, wallets, phones, the computer as a reminder to stop and think “do I really need this?” “Should I really be spending this money, or would it be better spent on something else?” Turn out the lights, use less toothpaste, don’t waste food. While you’re not handing over hard earned cash the moment you turn on a light – you will. Saving starts now.

If there are things that you really, really want, rather than buying them on impulse, use a wish list. Write down the item that you want, the date and the price. It can be an eye opener, just how many times you think, “What did I want that for?” If you find after a few weeks that you still really want it, then save up rather than going into debt for it, you’ve lived without if for this long.

Having clear goals helps when the shopping monster comes tempting. While it’s important to make the most of life day to day, generally our goals will be more important than say another top. We’re either working towards our goals, or working away from them. Ask yourself, “is this putting my financial goals in jeopardy? Is it worth it?” The answer to the second question might just be yes, don’t feel guilty if it is.

It’s no secret that I’m on a tight budget at the moment. The other day I was walking to the library and there were a couple of office workers sitting in the park with their double size lattes and store bought muffins. I thought “I wish we could do that,” and felt like I was missing out on something.

Further along there was a retired couple sharing a thermos of coffee and homemade cake. It was a doh! moment. Was their experience any less enjoyable than the other? Of course not. So on the weekend, we packed a picnic and enjoyed a beautiful day on the river (without spending extra money), and life couldn’t have been any sweeter.

It doesn’t take money to enjoy life to the fullest. You don’t have to feel like you’re going without, or making sacrifices to reach your financial goals.

3. Where are You Now? Establishing a Base Line

Do you know what you spend your money on? Do you know how much? Tracking and writing down your expenses can certainly be revealing. It’s amazing how a couple of dollars here and there can add up. Later we’ll be looking at ways to save more money, and the exercise of tracking your expenses is crucial to this. Have a look at the post on how to do it.

Once you’ve tracked your expenses for a week or two, write out a rough current budget – how much you earn in a month and what you spend your money on now. Be as specific as you can, because it will help you evaluate your expenses later on. Have a look at the budgeting series for info on writing out a budget. We’ll be building on this in Part 2 of this series.

Have a look at your debts as well. Write out all of your debts, the balance, the minimum payment, the interest rate. We’ll be using this later.

This information is your baseline. Your starting point. A way of tracking your progress. A way of saying “look how far I’ve come!”

 

While some of this is going to take time, you can still start saving money today, right this minute, by not spending. This may be a simple as turning out a light, having a shorter shower or making the choice to cook dinner instead of getting takeaway. Over a few weeks and months, the baby steps you take now will begin to build momentum and you will start to see significant savings. Every journey, as the cliché goes, starts with a single step.

Stay tuned for part 2 and 3, where I will look at ways to save money, build a buffer against tough times and build wealth for the future.

If you have any feedback, I would love to know what you think. Do you find this information helpful? Interesting? Do you enjoy your visit to the site? Don’t be shy about leaving a comment. Your input may just be the thing that helps someone out.

Have you read these posts?

1. Gaining Control Of Your Finances Part Three
2. Gaining Control Of Your Finances Part Two
3. the first step to gaining control of your money
4. want to save but don’t know where to start? start small–it’s worth it
5. what’s the trend? Understanding your finances with graphs