You haven’t spent that much money this month. There should be plenty left over to cover this, right?
Before long, the bank has sent you the alert—your account is in the red. You’ve overdrafted. Now you’ll almost certainly face two consequences…
1. Overdraft fees. The bank’s favorite way to slap you on the wrist for overspending. These are, on average, $33.58 per overdraft as of 2021.¹
2. Interest. The only reason you can keep purchasing once you’re in the negative is because the bank loans you money. And with every loan comes interest.
It may not seem significant, but these add up. In 2020, Americans spent 12.4 billion in fees alone.²
Here are some strategies to help your bank account stay above water…
This way, purchases that push your bank account past zero will be denied. Overdrafting becomes impossible. There are, however, two serious drawbacks…
You may feel silly if you try to make a purchase and it doesn’t go through. You may need to make a legitimate emergency purchase that exceeds the amount in your account.
Fortunately, there are other strategies at your disposal.
If you have an emergency fund, you can link it directly to your spending account. That way, if you overdraft, your emergency fund will automatically make up the difference.
This works well for covering emergency expenses. But if your regular spending overdrafts your account, you may squander your emergency fund on non-emergencies.
Consistent overdrafting may mean that you have a spending problem. If that’s the case, the time has come to cut back. Set up a budget that keeps your spending above water each month. That way, you won’t come close to the dangers of overdraft.
It all comes down to why you’re overdrafting. If you overdraft on occasion because of emergencies, simply link your emergency fund to cover the difference. But if it’s the symptom of a deeper issue, it may be time to seek help.
¹ “Overdraft fees hit another record high this year—here’s how to avoid them,” Alicia Adamczyk, CNBC, Oct 20, 2021, https://www.cnbc.com/2021/10/20/overdraft-fees-hit-another-record-highheres-how-to-avoid-them.html
² “Banks Charged Low-Income Americans Billions In Overdraft Fees In 2020,” Kelly Anne Smith, Forbes, Apr 21, 2021, https://www.forbes.com/advisor/personal-finance/how-to-prevent-overdraft-fees/
So why does it feel like you have so little control? How many people feel financially helpless? Like there is barely enough to make ends meet and never enough to prepare for the future?
78% of Americans were living paycheck to paycheck before the pandemic hit.¹ That means most of us weren’t in control of our finances. We were just riding the coattails of a fabulous economy.
So what does it take to achieve financial control?
Here are some basic ways to grab the reins of your personal finances!
You should know how much you make. But do you know how much you spend and on what? Discovering that your bank account is empty at the end of each month is one thing. But figuring out where your money is going—that’s something else entirely. This knowledge is what will help equip you to create a strategy and take control of your life.
Start by figuring out how much you spend in total and subtracting that number from how much you make. Then, break down your spending into categories like rent, gas, eating out, entertainment, streaming services, and anything else that takes a chunk out of your normal expenses. It might feel like homework, but hang in there.
Goals are the key to creating an effective financial strategy. You have to know what you’re building towards if you want to develop the best steps and strategies. It’s okay to think simple. Maybe you’re just trying to get out of debt. Perhaps you’re trying to save enough to start a business or buy a home. Or you might be a bit more ambitious and have an eye on a dream retirement that you want to start preparing for now.
Figure out what it is you want and how much it will cost. From there you can use your budget to start cutting back in categories where you spend too much. You might discover that you need to increase your income to accomplish your goals. Map out a few steps that will move you closer to making your dream a reality.
Once you’ve built a strategy based on your goals and budget-fueled insights, the only thing left is to follow through and take action. This isn’t a grandiose, one-time maneuver. This is about little decisions day in and day out that will help make your dreams a reality. That means making small moves like meal prepping at home instead of eating out, or avoiding clothing boutiques in favor of thrift shop finds. Those little acts of discipline are the building blocks of success. You might fall off the wagon every now and again, but that’s okay! Pick yourself up and keep pushing forward.
It’s important to have each of these three components operating together at once. Knowing your financial situation and not doing anything about it may not do anything but cause anxiety. Cutting your spending without an overall vision can lead to pointless frugality and meaningless deprivation. And a goal without insight or action? That’s called a fantasy. Let’s talk about how we can implement all three of these elements into a financial strategy today!
¹ “78% Of Workers Live Paycheck To Paycheck,” Zack Friedman, Forbes, Jan 11, 2019, https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#3305f4cb4f10
There seems to be an endless stream of envelopes from companies all demanding payment for their products and services. It feels like you have a choice of what you want to do with your money ONLY after all the bills have been paid – if there’s anything left over, that is.
Not to rub salt in the wound, but may I ask how much you’re saving each month? $100? $50? Nothing? You may have made a plan and come up with a rock-solid budget in the past, but let’s get real. One month’s expenditures can be very different than another’s. Birthdays, holidays, last-minute things the kids need for school, a spontaneous weekend getaway, replacing that 12-year-old dishwasher that doesn’t sound exactly right, etc., can make saving a fixed amount each month a challenge. Some months you may actually be able to save something, and some months you can’t. The result is that setting funds aside each month becomes an uncertainty.
Although this situation might appear at first benign (i.e., it’s just the way things are), the impact of this uncertainty can have far-reaching negative consequences.
Here’s why: If you don’t know how much you can save each month, then you don’t know how much you can save each year. If you don’t know how much you can save each year, then you don’t know how much you’ll have put away 2, 5, 10, or 20 years from now. Will you have enough saved for retirement?
Truth is, most of us don’t have a wealthy relative who might unexpectedly leave us an inheritance we never knew existed!
The good news is that you have the power to spend less and start building wealth. That’s great, and you might want to do that… but how do you do that?
The first “bill” you pay each month is to yourself. Shifting your focus each month to a “pay yourself first” mentality is subtle, but it can potentially be life changing. Let’s say for example you make $3,000 per month after taxes. You would put aside $300 (10%) right off the bat, leaving you $2,700 for the rest of your bills. This tactic makes saving $300 per month a certainty. The answer to how much you would be saving each month would always be: “At least $300.” If you stash this in an interest-bearing account, imagine how high this can grow over time if you continue to contribute that $300.
That’s exciting! But at this point you might be thinking, “I can’t afford to save 10% of my income every month because the leftovers aren’t enough for me to live my lifestyle”. If that’s the case, rather than reducing the amount you save, it might be worthwhile to consider if it’s the lifestyle you can’t afford.
Ultimately, paying yourself first means you’re making your future financial goals a priority, and that’s a bill worth paying.
In an era of less social contact, debit cards are convenient. Just swipe and go. Even more so for their mobile phone equivalents: Apple Pay, Android Pay, and Samsung Pay. We like fast, we like easy, and we like a good sale.
But are we actually spending more by not using cash like we did in the good old days?
We spend more when using plastic – and that’s true of both credit card spending and debit card spending.² Money is more easily spent with cards because you don’t “feel” it immediately. An extra $2 here, another $10 there… It adds up.
The phenomenon of reduced spending when paying with cash is a psychological “pain of payment.” Opening up your wallet at the register for a $20.00 purchase but only seeing a $10 bill in there – ouch! Maybe you’ll put back a couple of those $5 DVDs you just had to have 5 minutes ago.
When using plastic, the reality of the expense doesn’t sink in until the statement arrives. And even then it may not carry the same weight. After all, you only need to make the minimum payment, right? With cash, we’re more cautious – and that’s not a bad thing.
When you pay with cash, the expense feels real – even when it might be relatively small. Hopefully, you’ll get a sense that you’re parting with something of value in exchange for something else. You might start to ask yourself things like “Do I need this new comforter set that’s on sale – a really good sale – or, do I just want this new comforter set because it’s really cute (and it’s on sale)?” You might find yourself paying more attention to how much things cost when making purchases, and weighing that against your budget.
If you find that you have money left over at the end of the week (and you probably will because who likes to see nothing when they open their wallet), put the cash aside in an envelope and give it a label. You can call it anything you want, like “Movie Night,” for example.
As the weeks go on, you’re likely to amass a respectable amount of cash in your “rewards” fund. You might even be dreaming about what to do with that money now. You can buy something special. You can save it. The choice is yours. Well done on saving your hard-earned cash.
¹ “Debit Spending Is On The Rise, But Is It Here To Stay?” Visa Navigate, Apr 2021, https://navigate.visa.com/na/spending-insights/why-debit-spending-is-on-the-rise/
² “MIT study: Paying with credit cards activates your brain to create ‘purchase cravings’ for more spending,” Cory Stieg, CNBC, Mar 13, 2021, https://www.cnbc.com/2021/03/13/credit-cards-activate-brain-reward-network-create-cravings.html
Even though it’s not always obvious, we carry lots of assumptions and attitudes about money that might not be grounded in reality. How we perceive wealth and finances can impact how we make decisions, prioritize, and handle the money that we have. Here are a few common money mindsets that might be holding you back from reaching your full potential!
It’s simple, right? The rich are swimming in cash, so they’re able to save. They get to build businesses and live out their dreams. The rest of us have to live paycheck to paycheck, shelling out our hard earned money on rent, groceries, and other essentials.
That couldn’t be further from the truth! Sure, you might not be able to save half your income. But you might be surprised by how much you can actually stash away if you put your mind to it. And however much you can save right now, little as it might be, is much better than putting away nothing at all!
On the other side of the coin (get it?) is the notion that you have to save every last penny and dime that comes your way. There are definitely people in difficult financial situations who go to incredible lengths to make ends meet. Just ask someone who survived the Great Depression! But most of us don’t need to haggle down the price of an apple or forage around for firewood. And sometimes, the corners we cut to save a buck can come back to bite us. Set spending rules and boundaries for yourself, but make sure you’re not just eating ramen noodles and ketchup soup!
There are definitely times when you might not feel like you need to be proactive with your finances. You don’t feel like you’re spending too much, debt collectors aren’t pounding down your door, and everything seems comfortable. Budgeting is for folks with a spending problem, right?
The fact of the matter is that everyone should have a budget. It might not feel important now, but a budget is your most powerful tool for understanding where your money goes, areas where you can cut back, and how much you can put away for the future. It gives you the knowledge you need to take control of your finances!
Breaking mediocre money mindsets can be difficult. But it’s an important step on your journey towards financial independence. Once you understand money and how it works, you’re on the path to take control of your future and make your dreams a reality.
Maybe your numbers never add up or too many expenses are coming “out of the blue”. You might also feel a sense of dread every time you make a purchase. No matter what you do, this whole budgeting thing doesn’t seem to be working.
Hang in there! Here are a few budgeting potholes that might be slowing down your financial goals and how to avoid them!
Budgets are supposed to help you use your money wisely. They should be a positive part of your life—they’re not supposed to make you feel like you’re constantly failing. But sometimes our passion to save money and get our financial house in order gets the better of us, and we set up budgets that are too restrictive. While coming from good intentions, an overly thrifty budget can actually make it harder to achieve your goals. An impossible to follow plan can make you feel discouraged and resentful. You might even decide that it’s not worth the hassle! Try starting with a more reasonable strategy and then build from there!
Sometimes our budgets are just too complicated to actually be useful. Not everyone loves working with numbers, and sometimes fiddling with spreadsheets can get so overwhelming that we just want to quit. Plus, there’s plenty of room for human error! A good option is to investigate free budgeting sites or apps. All you do is punch in the correct numbers and the magic of technology will do the rest!
Life is constantly changing. Your simple, streamlined budget might be perfect for the life of a young single professional, but will it still hold up in five years? Where will the portion of your paycheck that works down your student loans go once you’re debt free? And when will you start saving for a house?
Take some time every few months to review your budget and see what’s changed. Evaluate what you’ve accomplished and areas that need improvement. Ask yourself what your next milestones should be and if those line up with your long-term goals!
Budgeting takes work. But it shouldn’t be a burden. Cut yourself some slack, prune your process, and stay consistent. You might be surprised by the difference filling in budgeting potholes can make in your financial life!
One interior decoration blog estimated that decorating a living room from scratch could cost between $14,400 to almost $50,000!(1) The numbers for the dining room, bedrooms, and kitchen are similarly high. Furnishing an apartment averages between $3500-5800.² But is there a better way? How can you save some cash if you’re trying to furnish your home? Here are a few helpful tips to guide your decorating process!
Start by taking stock of what furniture you have that can be used in your new home. Some of it might work in your new home, some of it might not. Try to get an idea of what existing furniture will go where and make note of new items you’ll need.
Arrange your list of new items in order of importance and buy those first. Mattresses for your bedroom? Top of the list. Abstract modern art to hang in your bathroom? Maybe hold off on that until you’ve taken care of the essentials!
Concerned that your kitchen is a little drab? Worried that your table cloth doesn’t match your dining room? You might be surprised how far a new paint job will get you! It might be a more budget-friendly way to spice up your living situation than tossing all your old furniture out the door, especially if you do it yourself. Things like tables and wooden chairs are all potential candidates for a new coat of paint, as are the walls of your home.
But there’s no doubt that at some point you’ll need to get a new piece of furniture. What then? Cough up and pay a ridiculous price? You might be surprised by the resources available to acquire furniture at a bargain. Local thrift stores can be treasure troves for things like chairs, coffee tables, and bookcases. Craigslist and eBay are also worth investigating, as are estate and garage sales. And you can always scour the curbs for a free sofa if you’re feeling bold!
Furnishing your new house can be fun. It’s a chance to unleash your creativity and make your home a special place. Just make sure you follow these budget-friendly tips before you start indulging!
¹ “Budget Breakdown: How Much Does It Cost To Decorate A Room?” The Kuotes, https://www.kathykuohome.com/blog/budget-breakdown-how-much-does-it-cost-decorate-a-room/
² “The Cost of Furnishing an Apartment: A Step-By-Step Guide With Breakdown Of Furniture Costs,” Bonnie Stinson, Furnishr, Jan 7, 2022 https://furnishr.com/blog/cost-furnishing-apartment/
These words have been plastered all over the news and social media feeds for the last two years. And there’s no sign of it stopping.
As individuals and as businesses, we can’t control the economy.
But what we can control is how we respond to it.
The key is to stay focused on your long-term goals, and make sure your actions align with them.
Here are a few tips on how to navigate economic volatility…
1. Check your emotions. Fear is the natural response to economic volatility. What will happen to your job? What will happen to your business? What will happen to your retirement savings?
Know this—one of the worst mistakes you can potentially make is acting rashly on those fears. Volatility creates opportunity. Don’t lose out on potential because of headlines you read. Instead, assess your situation, what you stand to lose, and opportunities you might have.
2. Stay focused on your goals. It’s easy to get caught up in the day-to-day noise of the news. But if you want to help your sanity—and make sound financial decisions—it’s important to keep things in perspective.
How far are you from retirement? What kind of lifestyle do you want in retirement? What’s your strategy for protecting against long-term losses?
If your goals are in line with your current reality, take a deep breath and ride out the storm. If not, it’s time to reevaluate where things stand and make adjustments as necessary.
3. Review your budget and financial strategy. Once you’ve gotten past the initial emotional reaction, it’s time to take a clear-eyed look at your budget and finances.
There are two critical components to examine here—your emergency fund and your debt.
If you have an adequate emergency fund in place, keep it intact. Resist the temptation to tap into your savings to cover short-term losses. You’ll need your emergency fund for different expenses, like emergencies.
As for debt, make sure you’re not overextending yourself with credit cards and loans that only might make sense when the economy is booming. If you lose your job in a downturn, the last thing you want is high-interest debt hanging over you.
4. Meet with your financial professional. It’s simple—a licensed and qualified financial professional can help stop rash financial decision making in its tracks.
A financial professional can help you see the big picture, keep things in perspective, and develop a strategy that can help you stay on track—no matter what the economy throws your way.
While economic volatility can feel frightening, it’s important to stay focused on your long-term goals. Having the right mindset and guidance can help you navigate a crisis with confidence.
And it’s not just a minor price hike. Used cars saw a 66%-110% price increase from December 2019 to December 2021.¹ For comparison, overall prices have increased “only” 12% from 2019 to 2022.²
Why? Like almost everything over the last two years, it all comes back to the pandemic.
Here’s the story…
New cars need microchips. That’s where all the computerized magic happens that consumers have come to expect when they drive out of the dealership.
But chip manufacturers were hit right between the eyes by the pandemic. They faced extensive lockdowns, followed by surging demand once the economy began to recover. Factories were simply unable to produce new cars quickly enough. Consumers needed alternatives. So they started buying used cars, en masse.
Demand shot up. Supply went down. And as a result, prices for used cars have soared.
Fortunately, there may be relief on the horizon. If chip manufacturers reopen and new cars hit the market, used car prices should start to trend downward. J.D. Power estimates the market will stabilize in late 2022 or early 2023.³ Morningstar puts the date in 2023.⁴
But whether those predictions become reality remains to be seen. For now, if you’re in the market for a used car, expect to pay more than you would have just a few years ago.
¹ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Jane Ulitskaya, Cars.com, Feb 3, 2022, https://www.cars.com/articles/when-will-used-car-prices-drop-3-things-car-shoppers-should-know-446525/
² “$1 in 2019 is worth $1.12 today,” in2013dollars.com, https://www.in2013dollars.com/us/inflation/2019?amount=1#:~:text=Core%20inflation%20averaged%203.02%25%20per,2022%2C%20a%20difference%20of%20%240.09
³ “When Will Used-Car Prices Drop? 3 Things Car Shoppers Should Know,” Jane Ulitskaya, Cars.com, Feb 3, 2022, https://www.cars.com/articles/when-will-used-car-prices-drop-3-things-car-shoppers-should-know-446525/
⁴ “Used car prices continue to surge. Here’s why — and when they could come back down,” Mike Stunson, Miami Herald, https://www.miamiherald.com/news/nation-world/national/article257060717.html#storylink=cpy
This isn’t to talk bad about your brain—it’s like a supercomputer ceaselessly working to make sense of the world and keep you safe. The trouble is, sometimes it does this by coming up with shortcuts that feel like they should make sense, but can lead to serious errors.
These mistakes are sometimes called mind traps. They can derail logical thinking and lead you astray. And they can have a big impact on your money.
Here are some of the most common money mind traps, and how you can avoid them!
1. All or nothing thinking. This is a classic example of the “great” being an enemy of the “good”. You might feel that unless you can go all out on saving and building wealth, you might as well do nothing. Go big or go home, right?
It’s an obviously flawed line of thinking. Saving even a little is always better than saving nothing. But the temptation not to is still very, very powerful. Why? It might be because of anxious or perfectionist tendencies. Anything short of perfection seems like failure. And that sense of failure is so uncomfortable that it seems safer to not even start.
But here’s the truth—you’ll never go big unless you start small. Waiting for the stars to align, or even to get all your ducks in a row, will result in permanent inaction.
The solution? Commit to save $20 per month (or whatever amount works with your budget). Read one blog article about money. Follow just one money influencer. You might be surprised by the difference that even just a little change can make!
2. Magical thinking. For example: “I’ll start saving when I get a raise.” Spoiler—you won’t.
Why? Because you didn’t start saving after your last raise. What would make this time any different?
This is magical thinking. This time is going to be different, even if you do nothing different. It’s the hope that circumstances will change on their own, and with them, your behavior.
The solution is to be proactive. If you want to save more money, you have to take action. That might mean reworking your budget or setting up automated transfers into savings. It might mean looking for ways to make more money. But whatever it is, do it now. If the “present you” won’t do it, neither will the “future you”.
3. Catastrophizing & personalizing. Have you ever opened your bank account and thought “This is the end of the world?” It’s happened to everyone at least once. Suddenly, you realize you’re far closer to zero than you realized. Worst of all, you’re not sure why.
To be clear, that’s NOT the end of the world. There could be plenty of good reasons why you’ve spent more this month, and there are plenty of ways to get your financial house back in order.
But that’s not how it feels. It feels like defcon 3. Surely this means that you’ll default on the mortgage, lose the car, and ruin your future.
And that catastrophizing almost always leads to personalization. You start blaming yourself. How could you let this happen again? What’s wrong with you? Those negative voices are off to the races, and it can feel impossible to get them under control. And it’s all because you’re looking at your bank balance with no plan.
The solution is to step back, take a breath, and remember that it’s just a number. It does not define you. Sure, you need to take responsibility for your actions. But follow your train of thought. Where are you jumping to conclusions? What are you assuming? If you can catch yourself in the moment, it’s a lot easier to calm those anxious thoughts before they get out of control.
Mind traps are dangerous because they’re so believable. They seem like rational thoughts, but they’re really just faulty logic that can lead to costly mistakes.
The good news is, once you’re aware of them, you can start to catch yourself in the act. And with practice, it gets easier and easier. So next time you find yourself thinking you have to go big or go home, or that your finances will magically fix themselves, or that you’re a failure, take a moment. Write down your thoughts. And then ask yourself—is this really true? Or is it just a mind trap?
Sure, it’s a source of value and a medium of exchange. But above all, it’s a symbol.
What is a symbol? It’s a visible representation of something that’s invisible.
Think about it—can you see success? Not really. It’s an abstract idea. So money is largely how people evaluate if they’re succeeding or failing.
What do you see when you imagine a successful person? Expensive cars, big houses, fancy clothes, and lots of zeros in a bank account.
Those are the symbols of success. And make no mistake—money is the central symbol of success.
How do you feel when your bank account looks full? You probably feel awesome! You get a quick rush, and your steps are just a touch lighter.
But what about when you’re in debt or when you can’t make ends meet? Maybe you feel not so great. You might become stressed and anxious, and feel like you’re not good enough.
That’s because money is a visible representation of your success or failure. It’s a way to keep score.
You see that loaded bank account, and you think “Everything looks good! I’ve really got my act together.”
You see an empty bank account, and you think “What have I been doing? I’ve really messed up my finances.”
Here’s the sticking point—the symbolic nature of money is great for motivation. But it’s terrible for guiding decisions.
Why? Because chasing the symbol can easily lead you to making moves that give you the appearance of wealth without being wealthy. You start buying things far beyond your budget to represent wealth you don’t actually have. This is the fast-track to living paycheck-to-paycheck.
But as motivation? That’s where the power of the symbol lies. Think about that bump you get when you see your net worth climb. Use that feeling as fuel to keep pushing when you hit roadblocks and obstacles.
So what does money mean to you? Is it a scorecard? A way to motivate yourself? Or something else entirely?
How you answer those questions will determine whether money is a powerful tool or a dangerous weapon in your life.
Is racking up credit card debt or taking out payday loans financially dangerous? Of course! But they’re obvious. Hard to miss. They’re like a voice yelling into a megaphone “Hey! Don’t do it!”
But what about money mistakes that aren’t so obvious? Or even worse, money mistakes disguised as money wisdom?
Those may not devastate your bank account in one swoop. But they often go unaddressed. And over time, they add up.
So here are some money mistakes you might not have noticed.
Penny pinching. Sure, it sounds like a great idea in theory. But when you’re constantly scrimping and saving, it’s tough to enjoy life. What’s the point of working so hard if you can’t enjoy a reasonable treat now and then?
Plus, penny pinching may stop you from taking calculated risks that could save your money from stagnation.
So instead of extreme thriftiness, try moderation instead. You may find yourself far more inspired to budget and save than if you commit to complete frugality.
Under or over filling your emergency fund. A lot of people make the mistake of not having an emergency fund at all. It leaves them vulnerable to unexpected expenses and financial emergencies.
But when you have too much money in your emergency fund, it might be tough to make any real progress on your long-term financial goals. A good chunk of your net worth could be sunk into an account that’s not growing.
The solution? Save up 3 to 6 months of income in an easily accessible account, but no more. Use that money to cover emergencies ONLY. If it runs low, refill it.
Once your emergency fund is fully stocked, you can devote the rest of your income to building wealth.
Leaving goals undefined. It’s tough to achieve a goal you don’t have. Do you know where you’ll be financially in 5 years? 10? What are some things you’d like to save towards? A nicer home? An awesome vacation? A comfortable retirement? Not sure?
That uncertainty makes it easy to fudge good financial habits. It’s hard to see how lapses in your overall strategy can impact your big picture because you don’t have one.
So when it comes to your money, be specific. Very specific. Write out your goals and make sure they’re measurable. That way, you can monitor your progress and ensure you’re on the right track.
Be on the lookout for these dangerous money mistakes. They may seem innocuous, but they can add up over time and stop you from reaching your financial goals. Stay vigilant and steer clear of these traps!
It makes sense. Life is hectic. Schedules are full. Sometimes, you feel like you hardly have a second to brush your teeth, much less have time to sit down and enjoy a heart-to-heart conversation with a friend. And so important decisions get pushed further and further into the future.
That’s fine in some cases. Do you need to decide how to organize your garage right now, at this very moment? No, probably not.
But with something like your finances, procrastination can cause disaster. Why? Because time is the secret ingredient for building wealth. The sooner you start saving, the greater your money’s growth potential. Likewise, the sooner you get your debt under control, the more manageable it becomes.
And with your money, the stakes couldn’t be higher. After all, it’s your future prosperity and well-being that could be at risk. Procrastination is downright dangerous.
That urgency, however, doesn’t make it easier to start saving. In fact, you may have noticed that finances suffer more from procrastination than anything else.
There’s a very good reason for that. Procrastination is driven, above all else, by perfectionism. Failing feels awful, especially when you know the stakes are high. Your brain sees the discomfort of trying to master your finances and failing, and decides that it would feel safer to not try at all.
It’s a critical miscalculation. Making an attempt to master your finances can at least help move you closer to your goals. Procrastinating never does.
Think of it like this—50% success is better than 0% success.
The key to beating procrastinating, then, is to conquer the perfectionist mindset and fear of failure. It’s no small feat. Those habits of mind are often deeply ingrained. They won’t vanish overnight. But there are some simple steps you can take, like…
Break big goals down into small steps. This relieves the overwhelm that many feel when facing important tasks. As you knock out those small steps, you’ll feel empowered to keep moving forward.
Don’t go it alone. Procrastination thrives in isolation. Seek out a friend, loved one, or co-worker to help hold you accountable and share the load—even if it’s just a weekly check-in to see how each other are doing.
Work in short, uninterrupted bursts. Set a timer. Put down the phone. Work. After about 15 minutes, you’ll notice something strange happening. Time starts to either speed up or slow down. Distracting thoughts vanish. The lines between you, your focus, and the task at hand start to evaporate. You feel awesome. This is called a flow state, and it’s the key to productivity. Make it your friend, and you’ll probably notice that procrastination becomes rarer and rarer.
Now that you know the cause of procrastination, try these tips for yourself. Set a 30 minute timer. Then, break your finances into tiny action steps like checking your bank account, automating saving, and budgeting. Work on each item in a quick burst until you’ve made some progress. Then, talk to a friend about your results!
Just like that, you’ve made serious headway towards beating procrastination and building wealth. Look at you go!
Whether you’re new to the world of budgets or you just want some help, this article will get you started on the right foot. There’s no one way that works for everyone, but these different methods can give you an idea of where to begin.
Method 1: The old fashioned way. First, write down your total monthly take home pay. Next, break down your monthly spending into categories and write down how much you spend on each. Add those numbers together. Then, subtract that number from your take home pay.
The advantage of this method is that it’s rewarding. You get to see your budget grow from the ground up. It connects you to your money like few other projects will.
It can, however, be frustrating. You’ll run into snags, miscalculations, and old fashioned human error. And that can nip your budget in the bud.
Method 2: Pre-made spreadsheets. This is an easy way to create a customized budget. There are countless templates from Google Drive, Microsoft Office, the Federal Trade Commission, Nerdwallet, and more!
Unfortunately, they still require some legwork. You may need to customize your budget to your specific needs. And they don’t sync with your bank account, meaning you’ll need to manually input your monthly spending.
Method 3: Budget apps. They come in a variety of different flavors, but they all serve a common purpose—make budgeting as simple as possible.
Typically, these apps handle the categorizing and all the math. You simply enter your monthly income, log your spending into categories, and let the app work its magic.
Not all budgeting apps are the same. Some require you to manually enter your spending, while others sync with your bank accounts. Some are free. Some cost money.
Here are a few of the most popular budgeting apps to investigate…
Mint - most popular
YNAB (You Need a Budget) - syncs with accounts, costs $84/year
PocketGuard - designed for overspenders
Honeydue - designed for couples
There’s not one particular way to begin budgeting. It all depends on your personal needs and what you’re comfortable with.
With so many options, you should be able to find the perfect method for you.
What do you think? Do you have a simple budget? How did you start it?
And it’s true. Knowledge is power because it shows you how to act. The more informed your actions, the more likely they are to be fruitful and effective.
Here’s another quote you’ve probably heard a few times—“Know thyself.”
Why? Because there’s no greater power than power over yourself. The more you know yourself, the more capable you’ll be to shape your actions, your habits, and your destiny.
This couldn’t be more relevant than when it comes to money matters. The more you know about your financial habits and tendencies, the better equipped you’ll be to control your financial future.
Here are some ways to know thy financial self.
Notice your emotions. Like any other part of your life, emotions can affect money. They’re especially important to be aware of because they can cause you to act in ways that are counterproductive financially.
For example, have you ever felt anxious about checking your bank account?
Or felt a craving to blow some money to de-stress?
Or swelled with pride when you see how much you’ve saved?
Those are all emotions, and they’re all related to money.
So the next time you’re spending money, or checking your bank account, or pinching pennies, take a moment. Breathe. Notice how you’re feeling. Those emotions can give you valuable information that can help you make better financial decisions in the future.
Notice your thoughts. Feelings almost always lead to thoughts. For instance, anxiety about looking at your bank account could lead to an internal conversation like this…
“Can I afford that? Oh, I bet I can’t. I WAY overspent the other day at… whatever, I never have enough money. I keep meaning to spend less, but I just can’t stop myself. Why do I even bother?”
See what happened? A feeling of anxiety led to a negative thought—that you can’t control your finances.
So what do you think about money? And that doesn’t mean your “opinions” about the economy, your take on billionaires going into space, or the NFTs are the fine art of the future] you share when you’re chatting with friends. It means the thoughts that flow through your mind whenever you encounter money in daily life.
Take a few moments right now and notice those thoughts. Are they positive? Are they negative? Are they neutral?
Notice your actions. Just like a feeling almost always leads to a thought, so does a thought almost always lead to an action.
Those actions might be to ignore, or repress, or give in. But one way or another, thoughts will result in actions.
This is where budgeting helps. It’s like creating a journal of your actions, which are a window into your thoughts, your feelings, and who you are.
Notice lots of new shoes, designer handbags, or suddenly having more blingy watches than days of the week? These can reveal a facet of your financial self—maybe you think that taking advantage of every sale at the mall (i.e., buying things you don’t really need) will relieve feelings of anxiety.
Or maybe you’re penny-pinching so much that you’re surviving on peanut butter sandwiches and hating every bite. That could reveal either a hearty resourcefulness in lean times, or an unfounded worry about going without.
Or maybe you’re mindlessly wasting your dollars with nothing to show for it. Think hundreds spent on games on your phone, getting food delivered every night, or joining that fancy wine club all your friends are in. Perhaps this reveals that you are actually afraid of your finances, so afraid, in fact, that you can’t face reality.
The more you know about your financial self, the better equipped you’ll be to control your finances. You’ll see habits that you need to curb, and habits you need to cultivate.
Simple advice, but it goes a long way. Knowledge is power!
Whether you’re in your 20’s and paying off student loans or in your 40’s and trying to save for retirement, financial decisions can be complicated.
The good news? There are steps you can take to avoid mistakes and help your peace of mind when it comes to money management. Here are some of the most common financial blunders people make, and tips on how to avoid them.
Caring too much about what others think. This may be the tough love you need to hear. No one judges what you drive. Or the watch on your wrist. Or the size of your home. And the one-in-a-million person who does? They’re probably someone with WAY bigger problems than your 2006 economy car that still gets great gas mileage.
But that fear is powerful for a reason. It’s been carefully nurtured by TV commercials and Instagram accounts with a singular goal—to make you buy things you don’t really need.
Know this—you’ll gain far more respect by attending to your own financial situation than by desperately trying to keep up appearances.
Not asking for help when you need it. Let’s face it—mastering your finances is symbolic of becoming an adult. You’re supposed to know how to run a budget, save for retirement, and somehow have enough left over for a nice summer vacation. There’s tremendous internal pressure to act like you know what you’re doing.
But were you ever taught how money works? Did any teacher, professor, or mentor sit you down and explain the Rule of 72, the Power of Compound Interest, or the Time Value of Money? If you’re like most, the answer is no. It’s a cruel double-bind—to feel good about yourself, you must master skills no one has ever taught you.
This keeps you from asking for help. You get caught in shame, denial, and confusion. It’s hard to admit that you don’t know something that seems so basic, so essential.
But rest assured—you’re not the only one. And the right mentor or financial professional will listen to your story without judgment and seek to help you.
Procrastination. There are few things more daunting than staring at a pile of bills, an empty bank account, or an intimidating stack of paperwork. You know what you have to do. But it doesn’t happen because you’re so overwhelmed by the task ahead. And it’s especially daunting if you’ve never been taught how money works—you don’t even know where to start!
But nothing causes financial pain quite like procrastination. That’s because it causes exponential damage. Your bills pile up. Your interest rates rise. Your savings fall drastically behind, and you must save far more to catch up.
The antidote? Break tasks down into smaller, manageable steps. Maybe that means signing up for an online budget app or working with a financial professional. It might mean automating $15 per month into an emergency fund, or cooking one dinner at home each week.
It doesn’t matter how small the task is, as long as it helps put money back in your pocket and stops the scourge of procrastination.
In conclusion, making financial mistakes is something that can happen to anyone. By knowing some of the most common financial mistakes people make and what you can do to avoid them, you’ll probably have more peace of mind when it comes to money management.
If you want to maintain a budget and save money, then you need a plan. The first step is understanding the basics—what is a budget? How does it work? What are the benefits of having one?
To effectively manage your monthly budget, you must take certain steps from day one. This article will provide some helpful tips and tricks on how to get started and keep going strong until payday rolls around!
What is a budget?
A budget is a plan. It helps you set limits for your spending, so that you can track your income and expenses. Maintaining a budget keeps you aware of when you are spending too much or if there are areas where your money could be saved.
It can also help you understand your spending habits as well as identify problems, such as giving in to too many sales or buying expensive lattes every day. With a clear understanding of how you spend money every month, you may be able to reduce expenses and even start saving for luxuries or emergencies. You can’t have a goal of saving for your next summer vacation if you don’t know how much money you’re spending now.
How to create your budget
The first step is to set goals for yourself for income and spending. When it comes to income, you need to consider all the ways you get paid. What is your salary—after taxes and any other contributions you make, like to a 401(k)? Is your employer cutting back your hours? Do you have another source of income such as a side job or freelance work?
Be completely honest with yourself about how much money you have coming in. Once this figure is known, you can assess your spending and determine how much of your income goes towards them every month.
Next, make a list of all fixed monthly bills, such as rent or loan repayments. Then make a list of variable expenses, such as groceries or gas. Lastly, make a list of all your monthly discretionary spending, or ‘fun money’.
If you struggle with this last step, look at your bank statements. It’s the easiest way to find a complete record of your spending. This will help you pinpoint the areas that you could cut down on or even eliminate.
Leverage your budget
Now that you have your budget, you can take action. You can save money by leveraging your budget to meet your monthly goals.
The first way is to leverage your income. If you have a job, talk to your employer about working extra hours, or ask for a raise. This will give you more money right out of the gate.
Beyond the extra income from a job, there are many other ways to add to your budget.
You can start small and pick up some side work—babysitting, dog walking, delivering pizzas, etc. If you can turn your free time into money, go for it! This all depends on your financial situation and what you feel comfortable with, so take the time to plan accordingly.
You can also think about reducing your expenses. Cutting back on luxury items can save money every month without having to work an extra job. Just think of all the things you could do with the money that’s currently going towards cable TV or eating out every day for lunch!
Don’t forget to have some fun every once in a while. Just find creative ways to have it on a budget. Plan more outings with friends like playing tennis or frisbee in the park, rather than going to the club every evening. Your community is bound to have some free local events going on, especially in warmer weather.
A budget is a way for you to track your expenses and income each month. You can leverage your budget in a number of ways, by increasing income or decreasing expenses—or both! With this knowledge, you’ll be able to save more and plan for the future.
You’re done with the 9-to-5, and ready to transition from employee to entrepreneur.
But there’s one last hurdle—how will you pay for it?
Starting a business requires resources. Whether it’s a laptop, store front, circular saw, or musical instrument, you’ll need tools to ply your trade. You’ll also need to consider the cost of hiring employees as your business grows!
There are three common strategies entrepreneurs leverage to raise money for starting a business…
1. Raise capital. Trade ownership of your business for money.
2. Borrow money. Pay interest for money.
3. Self-fund. Cover business expenses yourself.
There’s no right way to fund your business. But there are clear pros and cons to each approach. Let’s explore them further so you can have a better idea of which may be best for you!
1. Raise capital. This strategy involves scouting out wealthy individuals and institutions to give you money to fund your business. But it’s no free lunch. In exchange for funding, investors want a slice of your company. As your business grows, so does their profit.
That gives them a powerful say in the management of your business. If you raise capital this way, you may find these stakeholders calling the shots and pulling the strings instead of you.
Plus, raising capital simply is out of reach for most entrepreneurs. Unless you’re disrupting a major industry and have extensive experience, the risk-reward situation may not make sense for potential investors.
2. Borrow money. It’s straightforward—you ask a lending institution or friend for money that you’ll pay back with interest. Both parties take a calculated risk that your business will increase its value enough to repay the loan. It’s a simple, time-tested strategy for funding a new business.
The advantage of getting a business loan is that it keeps you in full control of your business. No board of directors or controlling shareholders!
But business loans require planning to manage. Your business will need to consistently make payments, meaning you’ll need to consistently earn profit. That’s rarely a surefire proposition when you’re first starting out.
So while debt can help your business expand and hire new talent, it’s typically wise to hold off on borrowing until later.
3. Self-fund. This is far and away the most realistic strategy for most entrepreneurs. It’s exactly what it sounds like—pay the upfront costs of starting a business yourself.
No debt. No working for someone else. You’re completely free to run your business. You’re also completely financially responsible for the outcome.
Will you be able to buy a storefront outright? Or start a competitive car manufacturer? Probably not. But there are dozens, if not hundreds, of opportunities that require far less capital.
Look around. You may have the tools you need to start a business at your fingertips! In fact, if you’re reading this article on a laptop or desktop, you’re positioned to start an online business right now. All you need is a service to provide clients.
The takeaway? The funding your business needs will depend on your situation. Challenging an established industry with a revolutionary approach? Then you may need outside funding. But if you’re like many, you have all the tools and resources you need to start your business.
From January to October 2021, rent skyrocketed 16.4.¹ And the market hasn’t cooled off—housing costs increased for renters 0.3% between September and October alone.²
It briefly looked like the housing market boom was temporary. There were plenty of rumors that the bubble was about to burst. Queue the comparisons to the 2007-2008 housing bubble!
But prices have kept on rising. In fact, Americans have come to expect it—on average, they anticipate a 10% increase in 2022.³ Financial institutions agree—the Federal Reserve Bank of Dallas predicts the surge to continue until December 2023.⁴
Why? Because of a perfect storm of…
• Supply chain woes • Housing shortages • Historically low interest rates • First-time home buyers
In other words, houses are in high demand, but there aren’t enough available and they’re expensive to build.
And those problems aren’t likely to be resolved anytime soon.
But take all that with a grain of salt. If there’s anything that the last two years have proven, it’s that anything is possible.
For now, it’s best practice to prepare your budget for rising rents.
¹ “Biden’s next inflation threat: The rent is too damn high,” Katy O’Donnell and Victoria Guida, Politico, Nov 10, 2021, https://www.politico.com/news/2021/11/10/rent-inflation-biden-520642
² “Biden’s next inflation threat,” O’Donnell and Guida
³ “Biden’s next inflation threat,” O’Donnell and Guida
⁴ “Biden’s next inflation threat,” O’Donnell and Guida
In some cases, the warnings might have been heeded but in other cases, we may have learned the cost of credit the hard way.
Using credit isn’t necessarily a bad thing, but it may be a costly thing – and sometimes even a risky thing. The interest from credit card balances can be like a ball and chain that might never seem to go away. And your financial strategy for the future may seem like a distant horizon that’s always out of reach.
It is possible to live without credit cards if you choose to do so, but it can take discipline if you’ve developed the credit habit.
It’s budgeting time. Here’s some tough love. If you don’t have one already, you should hunker down and create a budget. In the beginning it doesn’t have to be complicated. First just try to determine how much you’re spending on food, utilities, transportation, and other essentials. Next, consider what you’re spending on the non-essentials – be honest with yourself!
In making a budget, you should become acutely aware of your spending habits and you’ll give yourself a chance to think about what your priorities really are. Is it really more important to spend $5-6 per day on coffee at the corner shop, or would you rather put that money towards some new clothes?
Try to set up a budget that has as strict allowances as you can handle for non-essential purchases until you can get your existing balances under control. Always keep in mind that an item you bought with credit “because it was on sale” might not end up being such a great deal if you have to pay interest on it for months (or even years).
Hide the plastic. Part of the reason we use credit cards is because they are right there in our wallets or automatically stored on our favorite shopping websites, making them easy to use. (That’s the point, right?) Fortunately, this is also easy to help fix. Put your credit cards away in a safe place at home and save them for a real emergency. Don’t save them on websites you use.
Don’t worry about actually canceling them or cutting them up. Unless there’s an annual fee for owning the card, canceling the card might not help you financially or help boost your credit score.¹
Pay down your credit card debt. When you’re working on your budget, decide how much extra money you can afford to pay toward your credit card balances. If you just pay the minimum payment, even small balances may not get paid off for years. Try to prioritize extra payments to help the balances go down and eventually get paid off.
Save for things you want to purchase. Make some room in your budget for some of the purchases you used to make with a credit card. If an item you’re eyeing costs $100, ask yourself if you can save $50 per month and purchase it in two months rather than immediately. Also, consider using the 30-day rule. If you see something you want – or even something you think you’ll need – wait 30 days. If the 30 days go by and you still need or want it, make sure it makes sense within your budget.
Save one card for occasional use. Having a solid credit history is important, so once your credit balances are under control, you may want to use one card in a disciplined way within your budget. In this case, you would just use the card for routine expenses that you are able to pay off in full at the end of the month.
Living without credit cards completely, or at least for the most part, is possible. Sticking to a budget, paying down debt, and having a solid savings strategy for the future will help make your discipline worth it!
¹ “How to repair your credit and improve your FICO® Scores,” myFico, https://www.myfico.com/credit-education/improve-your-credit-score