Before today, you thought that the money would somehow materialize out of thin air. Before today, you thought that winning the lottery was going to be your very own path to a secure retirement. Before today, you had hoped that your life as a struggling rock star would be over, and you would be rolling in money and showing off the insides of your refrigerator on MTV's Cribs. But that was the old you. The new you knows that it is time to wake up and look squarely into one sobering reality: your financial future is in your hands.
No one else is in control, but you.
It is time to be proactive with your financial life. From "You and Your Money: A Primer," you will discover exactly what a monthly budget looks like. You will figure out the tools to understand where your money is going each and every day. As part of this new reality of being in control of your finances, you need to be in control of them every moment of every day.
Here are the five best ways for you to trim your budget -- fast. In trimming your expenses, you will be able to focus on eliminating your debts and on saving and investing your money. Doing all three things requires a high level of financial vigilance on your part. You can not wait until you need to act on this because, by then, it will be too late.
TIP #1: STOP SPENDING If you want to eliminate credit card and consumer debts, you have to stop spending -- and you have to stop spending right now. Some people have suggested freezing credit cards (hoping that by the time they thaw, the urge to splurge will have long passed). Others suggest cutting up all of your credit cards immediately. I hope that you have some self-control and only suggest that you stop spending on unnecessary things and do not put the necessities on your credit card. You are charged an interest rate for carrying a balance on a credit card. Therefore, if you stop spending, while your debts will continue to grow as a result of this interest rate, they will not grow as quickly.
TIP #2: TURN YOURSELF INTO A MONTHLY EXPENSE Anyone who is financially secure will tell you to pay yourself first. Turn YOU into a monthly expense. Work to structure your life so that you are not enslaved to credit card debts and car loans. In eliminating these debts, you will free up extra money to be able to put towards your future. The younger you are, the more aggressive you should try to be in putting money away for retirement. Aim to put at least10% to 20% of your take home pay into various savings and retirement accounts.
TIP #3: REVISIT YOUR AUTO INSURANCE Look at your auto insurance policy and figure out if there is anything you can do to get a discount or cut the premium. Do an internet search to figure out where the savings can come from. You can get discounts for being accident free for a set period of time. You can get a discount as a result of a career change, if it results in a much closer commute. There are a myriad of ways that you can end up saving money with your auto insurance. Call your insurer today and just ask. You will be surprised at what you might find.
TIP #4 HEALTH INSURANCE You can not afford to wait. I am not usually a fan of spending money now to save money later. By this I mean, if I am cash-poor then I do not buy the $500 curtains for my living room because it is going to save me $50 a year on my home heating and cooling costs. However, I do make an exception with any type of insurance -- especially with health insurance. Medical costs are soaring in this country. If you are caught uninsured, you may run the risk of making a payment for the rest of your life. You also run the risk of being uninsurable. With health insurance, it is quite simple: you simply cannot afford to wait.
TIP #5: CHECK YOUR BILLS You should check your bills carefully every single month. Claims of identity theft are on the rise. You should meet this rise with a heightened level of vigilance on your end. Every three to six months, you should do an analysis to see if your cell phone plan is really right for you. Through this process you may discover that you had additionally features -- like caller ID or call waiting -- that you could live without. If you are in good standing with your credit card company, you should periodically call the company to lower your APR.
This process of financial responsibility is not a one-time thing. You need to stay on top of it, actively and aggressively, from now until you die. (I know. That's a sobering thought.)
Each of these areas is crucial to maintaining your financial health. Late payments on your credit cards turn into a negative impact on your credit rating and your FICO score. Poor credit ratings and lower FICO scores turn into higher interest rates that you are charged for car loans, bank loans, and credit card interest. This means you end up paying more money over the long run. This can add up to tens of thousands of dollars over the course of a lifetime. Additionally, these poor scores can stand in the way between you and home ownership.
These tips will not get you out of debt overnight. Nothing will. Nothing. But they will help you refocus your life, prioritize your finances, and help you on your path to financial freedom.
J. Richard Shanley has created a FREE e-course and published a FREE eBook designed to help you get control of your financial life. "You and Your Money: The Primer" can be downloaded at MollysBrother.com Sign-up today.
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