Control Your Money
Everyone I have ever spoken with claims to have the desire to be
in control of their money. Most of these people will admit that
they don’t feel like they have very much control over where
their money is spent and a surprisingly large number tell that
their money is in control of them. The people who feel like their
money is out of control are not the same people who don’t know
how to stop spending when they are out of cash, or when their
checking account is perpetually overdrawn.
If your money is controlling your life, you may have the feeling
that you get up in the morning and go to work for the sole purpose
of bringing home a paycheck and signing it over to the mortgage
holder, the auto finance company, the utility providers, your
eldest child’s college tuition office, your youngest child’s
youth activity director and every door-to-door child pitchman
selling school fund raising items.
How can you tell when your money is out of control? You fell as
though it is simply getting up and leaving your wallet whenever it
darn well feels like it. So what are you to do about your money
and controlling where it goes?
Know Where You Stand
Anytime you are going to go change anything in your life, you have
to know what it is that needs changing. This is the same whether
you are talking about your finances or your weight.
What you need is a snapshot of where your finances are right now.
The only way to do this is to create a Net Worth Index.
There is only one way you can create a Net Worth Index – and
that is honestly. Drop the kids off with your in-laws, sit down
with your spouse and start writing everything down on paper. You
can use a computer spreadsheet if you want to.
Start by listing everything you have that can be sold, and how
much you could reasonably expect to get for it. Do not claim your
19th Century rocking chair from Grandma Hopscotch is worth $500 if
someone who isn’t sentimentally attached would only pay $100.
While you and your spouse are taking inventory, remember to
include watches, diamond earrings, boats, vacation time-shares,
stocks inherited from Uncle John and your retirement accounts.
List everything and its’ sale value. When you do things like
Certificates of Deposit and IRA’s where there is substantial
penalty for early withdrawal use the face value. For our purposes
we’ll figure you won’t be taking the money out until it has
matured.
Now that you have inventoried everything of value and totaled up
what it is worth, do the same for your debts. Add in loans from
family, friends, banks, businesses, and mortgage companies, past
due accounts with the Gas Company and all credit card balances.
This is not the time to “forget” someone you owe.
Subtract how much you owe from how much you own. This number is
your Net Worth and should be a positive one, though it could be
kind of tiny. You won’t need to use this number again until next
year when you calculate your Net Worth Index again.
If your Net Worth Index reveals a negative number you are
definitely doing something right by working to bring your money
under control. What you’ll have to do is follow these four
steps, and if necessary taking drastic measures such as a second
job, selling valuables, or even selling your current house and
moving into a smaller, less expensive dwelling.
Develop Your Goals
After you know where you stand financially, you need to decide
where you want to go. This involves setting some reachable targets
or goals.
Goal setting is not very complicated and in this instance, we are
referring to the overall target of gaining control of your money.
To do this requires a few measurable small goals, sort of like
baby steps.
Your first baby step is to create a plan to pay off your debts.
Look at your list of debts again and find which one is the
smallest. This is the one you want to pay off first. Pay your
minimums on all the others, and then pay everything you can extra
a month on the smallest debt.
When it is paid off, take all the money you had paid on the
smallest and add it to what you are paying on the second smallest.
Keep doing this until you are out of debts to pay off. It
doesn’t matter if your debt is for a house or for your soda pop
at the corner gas station Following this plan you have created to
pay them off is your first baby step.
The second baby step will be the creation of an Emergency Savings
Account. This account needs some money added each month until you
have accumulated enough money to equal six months of your income.
The money you set aside here will help you avoid debt when you
have to make a surprise car repair or meet the deductible for your
child’s appendix operation.
Your third baby step will be found in the next paragraph, under
the heading of Spend with a Plan.
Spend With A Plan
Now that you know you are serious about controlling where your
money goes, and you are seriously doing something about your debt
it is time to make a plan. A spending plan is comparable to a
budget in the same way an imported pickup compares to an F-150.
When you use a spending plan to guide your finances, you know
critical work is getting done.
You need to know what your take home, or net, pay is. Start with
your gross monthly salary and deduct all taxes and Social Security
contributions. Next you should subtract how much you tithe or
contribute in charitable giving each month.
The amount you have left is your Spendable Income. The next thing
to pay for is your house expenses and your grocery bill –
include only the food you buy in a grocery store to prepare
yourself, no eating out or fast food here.
The very next thing to subtract is your debt payment. Once this is
taken out, you are left with the money you can spend on everything
else you require to live on for the month – also known as your
Disposable Income. Write down everything what all you spend money
on and see just how much it costs you.
Since it wouldn’t do any good to be working at paying off your
debts if you are adding to them every month, you had better find a
way to cut your spending down below your Disposable Income or else
you will never have control of your money.
Working with your spouse you can decide how to buy store brand
things for a fraction of the cost, do without the monthly beauty
saloon treatments, cancel club memberships and eat at home instead
of dining out 3 nights a week. Perhaps you could even take your
lunch to work instead of eating in the cafeteria every day.
The key is to find fun ways to decrease your spending amounts.
Involve the children and find small ways to reward them for their
practical money saving ideas, after all, they are part of the
family and can help too.
Once your spending is under control and kept below the level of
Disposable Income available, start to enjoy life. While you are
probably not quite as materialistic as the Jones’, you can enjoy
a great quality of life than they do as they run controlled by
their money.
Clean Up Your Clutter
I’ve found that after setting debt repayment as a goal,
wrangling the spending into line and in general improving my life
by gaining control of my money there is too much stuff in my life.
Not activities, but material things.
This is a good time for you to have a garage sale and clean out
your closets, the attic and wherever you have hidden all that
stuff over the years. The money you raise could be applied towards
your smallest debt to speed along its repayment.
Another thing you can do is look for larger things in your life
you can dispose of that will help you reach your goal sooner. Do
you have a vacation home you haven’t taken a vacation to for
several years? What about that second or third car – can you
sell it, pay off the loan against it and use cash to outright buy
a good used car?
You might think it will hurt to make large changes like this, and
it might. Once you have taken the step though, you will feel an
easing of the burden on your shoulders.
These four things are just the tip of the iceberg when it comes to
controlling money. This short over view is enough for you to get
started thinking about ways to begin taking control of your money,
but it doesn’t begin to be a step by step guide. Those kinds of
guides are out there, but they are too thick to include here.
Using this as a quick start guide to controlling your money will
get you pointed in the proper direction. As you progress you’ll
find dozens of ways to write your Spending Plan, a hundred more
goals to set, and plenty of ideas on how to cut costs. When you
are debt-free and telling your money what to do, instead of
following it around, you’ll be a happier person.
THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY. THIS IS IN NO
WAY GIVING ANY LEGAL ADVICE OR REPRESENTATION. THE INFORMATION
CONTAINED HEREIN WAS COMPILED FROM VARIOUS ARTICLES. FOR ANY LEGAL
ADVICE OR REPRESENTATION SEEK YOUR OWN LEGAL COUNSEL.
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