Finally Fixing Your Budget Situation

If you’re cursed with indecision and you’re having trouble starting, sometimes a concise list of important steps on the journey can be all you need. Consider this list as a guideline for improving your finances in the long run. A large part of my personality is the inability to make choices, even when the end result is clear - I call this "analysis paralysis". Being able to see your desired outcome but not knowing where to begin on the path to that outcome can stop you in your tracks, so when I finally established a way toward financial freedom for myself, I wrote down what direction I took such that it could help others, and I hope that it does.

1 - Start A Budget

Knowing how much money you have right now, what your expenses are, and what’s most important is the foundation of getting financially fit. For a budget to be successful, you need to track every source of income and every expenditure, from mortgage down to the tiniest candy bar. Once you've established your cash flow, you can start to see where you want to be, and how to get there. For instance, if you find that you're allotting significantly more money to "discretionary spending" or "eating out" than you'd like, then pare it down a bit. Realizing just how much money you're spending on little things like snacks, fast food, or smoking, can be a catalyst to changing those spending habits, and a budget is a great way to see it written down, undeniable and concrete.

2 - Identify Your Debts, Highest Interest To Lowest

A lot of advice you’ll see about finances suggests paying off your lowest debt first and then applying that payment to others, but this isn’t great advice for anything other than the sense of accomplishment paying off a debt gives you. Instead, aggressively pay from highest to lower interest rates. This way you’re saving money that would normally wrack up over the year. A 22% interest rate $1,000 loan is $220 a year – that’s an INSANE amount of extra money paid! So while paying off a small debt and then applying it to a bigger debt sounds good, it might not actually save you money in the long run. You need to see where your biggest amount of interest lies, and how much money you're losing per year while you pay that debt, and then get it paid off as quickly as possible. When you start to look at the money you're wasting each month or year on interest, it can be sobering but another good inspiration for changing the way you allocate funds.

3 - Get A Cash-Back Credit Card

Most cards offer up to 5% cash back (with a limit usually) on certain times and then 1-2% back unlimited on everything else. This is key because the economy right now isn’t offering a ton of savings account rates even approaching 1 or 2%. With the wealth of credit companies out there, most people can get a small line of credit that has cash back. That cash back amount can work for you, as is addressed in the next step. Be sure that there's no annual fee on the card, and often you can find cards that offer an incentive for signing up, like extra points given at signup or a gift card.

4 -Put Your Card and Budget Together

Look at your budget, and what you pay every single month - these are costs you can plan around, and that you can use your new credit card on. Making it a set-in-stone priority to charge recurring bills to the credit card and then paying it off completely each month is a great way to rack up points on the card and keep your costs centralized. As long as you never charge up more than you intend to pay off and NEVER carry a balance, you’re literally getting paid by the credit card company to buy stuff you would anyway.

5 - Find a Side Gig/Hustle/Part-Time Job

Budget in the money you get from your primary income source and stay on top of it, but also grab something on the side. It doesn’t matter what, be it car washing, lawn mowing, or freelancing online or something similar. Make some extra money each month in your spare time and throw it at a bill, and only at a bill. In fact, your side money should go into an account that only is used to pay on bills. This way you won’t be tempted to use the money for silly things. In addition, a side gig also makes you value your money more, as you're working harder and longer to get that money to get out of debt. It puts spending money on frivolous things in perspective a little bit better.

6 - Minimalize

Ebay, Craigslist, and plain old fashioned garage sales are great ways to clean up your house while getting money in your pocket. And psychological research suggests that clutter has a detrimental effect on your mental well-being, so clearing it out of your house can have positive health effects, too! Facebook is full of local "resale" groups, which can help you sell off your extra stuff, or "upcycle" it by trading it for something you actually do need. You might be pleasantly surprised what your old, unwanted stuff can help you barter for, or what kind of cash could be brought into your household by clearing out your attic.

7 - Maximize (your money)

Aldi is my favorite grocery store, but there’s a lot of other similar concepts, like Trader Joe’s, Costco, or Sam’s Club, not to mention the phenomenal catches you can get at your local farmer’s market when the seasons permit them. These places allow you to take $100 or less food budget and feed a family for a week or more, whereas more expensive stores will suck up your food budget like a sponge. In fact, creating a meal plan in advance and sticking to it can help improve your health and eating habits while tracking exactly where your money goes each month, in terms of eating. Using a no-frills grocery store like the ones listed above might not be as glamorous or fun as shopping at a big bells-and-whistles grocery store, but it will save you so much money on your food bill that it's totally worth it.

8 - Practice Mindfulness

Every minor purchase – a coffee in the morning on your way to work, for instance – can and does add up over the course of a year. Let’s say a coffee from a coffee shop costs $1.94 around here, and if you get one even 3 times a week, you’re looking at about $300/year, just in coffees. If you take that $6 and buy grounds that make 30 cups of coffee, and invest in a modest coffee maker at home, you will really see the savings add up over time. The problem is, however, that the saving are small and need to compound to see the difference and that’s where mindfulness comes into play. Being aware of your money makes you less apt to waste it. Try thinking of going out to eat in terms of how many hours you have to spend at your job to pay for it, and you’ll see what I mean. Focusing on how much your small changes will make in the long run is a great way to determine if a purchase is worth it, or if it will actually matter over the course of a month or a year.

9 - Establish Goals and Timelines

Making a clear goal (pay off X credit cards this year, save $1000 for a down payment on a home, etc) is a way to really bolster your dedication, but a nebulous goal can also be a detractor, as it makes it hard to focus on the path. Establishing a timeline and the activities needed to get there is a great way to gauge the success of your actions and recalibrate if necessary. Just be certain that you really break down your goals into manageable chunks - this way you get a great feeling of accomplishment as you're able to check things off your list, but also because having too broad of a goal can create a type of shock which makes it difficult to get started, or to know where to start. Small steps, over time, add up to a huge change, and so it is with goal-making, too.

10 - Stack Your Money (in Your Favor)

If you’re already using your cash back card, websites like Ebates or TopCashBack are a great way to establish multiple streams of discount/monetary rewards for buying things you already planned on buying. Combining discount programs (buying a discounted gift card from a site like with your own cash back card can feel a bit like cheating) is a great way to make your money work for you immediately! Stacking online coupons, and evaluating prices from one place to another is a great way to cut costs for your household. You also might consider investing in a membership program like Amazon Prime, where you play a flat fee per year to get free 2-day shipping for most products they sell. If you find that you buy the same items a lot, and they're significantly cheaper online, you can do the math as to how much free express shipping will save you, not to mention how much you'll save by making the switch to largely online shopping to begin with.

Take A Breathe And A Small Step

Ultimately, every journey begins with a small step. Just seeing an outline of a good path to financial freedom can help dispel the cobwebs of indecision and encourage improvement of habits and methods to stay on course. Focus on your goal, only look at what you're doing in the moment, and then take what comes next when it comes. In this way, taking small, precise steps inexorably towards what you want, you will have no choice but to succeed!