Steps to Success

Sometimes people’s spending can get away from them. They make purchases they’re sure they can afford or are talked into buying things they don’t need. Then, one day they wake up, they’re in debt, and they can’t see any way out. It’s around this time that most people admit they have a serious issue and need to make serious changes. The biggest problem most people face is not knowing where or how to get started. Outlined in this article are some general steps you can take to start reshaping your finances.

Step 1: Analyze your current financial situation

Looking at your current situation will allow you to determine just how much you’re spending, how much you’re making, and how much you’re saving. Knowing these cash inflows and outflows will help you build a foundation for your future planning. A good way to do this is to write down everything you spend and earn for a solid month. A daily spending diary will help you keep better control of your money and  will provide a list of your current expenditures, which will come in handy for budgeting.

Step 2: Set Goals

The key to setting goals is to make them realistic and attainable. One of the main reasons people quit on themselves when striving towards goals is that they often strive for too much, too fast. There are some general goals that anyone can have, such as “I want to save X amount of money by this time next year”, but you will have to set specific goals that you want to follow. For example, maybe you want to save up for a new car, or start saving for retirement, or pull yourself out from under a load of debt. Whatever your own personal goals, keep them realistic and stick to them. If some of your goals seem downright daunting, make them long-term goals and allow yourself a few years to reach that point. Financial success takes time, and rarely happens overnight.

Step 3: Identify your course of action

Now that you know where your money is going, you need to take a step back and see how you can make changes to start working towards your goals. You may consider taking on a second job to rake in more income to pay off loans faster, or maybe you need to go back to school to become more valuable in the job market. Sometimes it can be as simple as finding a higher yielding savings account so your money can grow 

faster.

Step 4: Budget

Perhaps the most important thing you can do when changing the way you spend is budgeting. If you have an idea of how much you spend on certain things, or wrote down a month’s worth of spending, you can start to limit how much you want to spend and start to increase the amount you can save each month. Budgets are not set in stone, and it’s okay if you spend a little more, and great if you spend a little less!. So if you don’t stick the budget exactly, don’t beat yourself up about it, but do make efforts to bring your spending back down. There are a number of sites that can help you make and stick to a budget. A great free site is www.budgetsimple.com.

Step 5: Take Action

Now that you have a path to follow and the tools to get there, it’s time to get to work. This step involves developing an action plan that identifies ways to achieve your goals. For example, you can decrease your spending to increase your savings, generate extra income by spending extra time on the job or by picking up a second one. If you’re concerned about year-end tax payments, you may increase the amount withheld from each paycheck, file quarterly tax payments, shelter current income in a tax-deferred retirement program, or buy municipal bonds. Implementing your plan takes time, and you may need to enlist the help of a professional. For example, you may use the services of an insurance agent to buy property insurance, or the services of a broker if you decide to purchase stocks, bonds, or mutual funds.  Whatever plan you choose, stick to it!