Believe it or not Christmas is just around the corner. It’s the most wonderful time of the year for everyone. Everyone gets excited and happy. The surrounding gets very colorful and bright because of the decorations.
Most of you are now busy with Christmas shopping, making sure you buy presents for the people you love. Some may have been blocking their calendar out for parties and gatherings. Others may have started baking cookies for their neighbors and friends.
Yes, it’s my favorite too! The colors around lightens up my mood everyday. There’s a unique sense of happiness in my heart when this time of the year comes. Actually in my country we have long Christmas. We consider the first day of September as the first day of Christmas until January 6 ( Three Kings ).
This year more than Christmas, I am excited about becoming financially fit. I made a vow to myself that I will make 2019 a better year for my finances. I want to tackle my debt so I can be free and start living a life that I love.
Tired of being sick and tired? Me too! So join me as we dive in to becoming financially fit this 2019. Below are some tips to follow:
Assess your finances.
Start by gathering your bank statements or logging in to your bank account in your computer. Take a closer look at your checking and savings account then list it using a pen and paper. Do the same thing with your credit account. List how much you owe, the balance and interest. By listing, you will get an idea of how healthy your finances or not. This will answer the following questions:
- Am I making enough?
- Was I spending too much?
- Did I miss paying my bills?
- Am I paying more than minimum with my debts?
- Do I have enough savings?
Create a budget.
Okay, let’s get to this B word. This is very common to everyone. Often times we hear but in all honesty, not everyone knows how to use. Or shall I say most of us don’t even know what does it really means.
Before I read books about finances, I have been saying this “budget” word but I don’t really know what it is all about. Funny eh? But yes, I am a total dummy when it comes to personal finance. However, finance books taught me a lot.
Budget is a very helpful tool in getting your finances in order. It simply giving your money a certain role. It is done by making a list of your income ( net ) and your expenses ( bill payments, necessities and savings). Like what Dave Ramsey said in his book that it is better to know where your money is going rather wondering where it went.
Now, there are different types of budget. There’s the 50/30/20, irregular budget and the zero sum budget. You have to determine the type of budget that works for you depending on your situation. This is not a one size fits all so you have to work for it. I personally use zero sum budget as I am trying to pay my debt off.
Cut back on your expenses.
Now that you have made a financial inventory, it’s time to get real. As you look at your bank statement, you can now figure out where your money went. Have you eaten out often? Did you grab too many coffees? Or maybe you’ve been shopping a lot lately. If none of those answers those questions, go back to your monthly bank statement again. There might be some money leaks that drains your bank that you’re not aware of. This leaks needs to be plugged to stop it from draining. You may be pay for services or subscriptions that you are not even using.
If that’s possible then it’s time to re-think about those expenses. Cooking your own food, brewing your own coffee and negotiating your phone plans and car insurances will make a huge difference in your budget. You will be able to save more than you thought.
Start saving for emergency and sinking fund.
Have you heard about emergency fund? I have actually read it from a book and some finance blogs as I was researching. I never thought that there’s a fund like this and it was necessary to have one.
Emergency fund is a savings fund necessary for emergency purposes like job losses, unexpected health issues that requires immediate action and breaking of your car. This fund will cover your some of your expenses, if not all, so that you won’t rely on credit. An amount of $1000 is a good start.
Sinking fund is a savings fund intended for things/situations that are expected to happen like, home maintenance, taxes, birthdays, holidays, doctor visits and travel.
Tackle your debt.
After taking all the steps above, its time to crush your debt. Start by making a list of all your debt along with the total amount, minimum payment and interest. Now, there are different methods of paying off debt. You may want to use snowball or the avalanche method mentioned in Dave Ramsey’s book The Total Makeover.
If you want to pay off debt faster you may look into increasing your income by getting a second job or you may want to start having a side hustle. I know having multiple streams of income helps a lot.
One of the most practical ways of getting financially fit is saving. I know that it is hard to set money aside especially if you have huge and multiple amounts of debts. However, saving is not impossible.
Think about a reason why you really wanted to save. A dream vacation with the family, house down payment or maybe you’re starting to save for retirement.
You may start by putting a certain amount of money aside. A $20 every month is a good start especially when money is really tight. You can increase it gradually as you find more ways in making extra money like cutting back on your expenses, selling your stuffs and adding another income.
This 2019 what are your goals that you’ve set? Have you ever thought about taking control of your finances this coming new year? If you finally made up your mind then it’s time to take action. You don’t have to start great, just take one step at a tie and you’ll get closer to your goal.