The Action Steps

So, you find yourself in a *typical* American financial situation: you’re spending more than you make, relying on debt to fill in the gap, you have less than $400 in emergency savings, you’re financing your car for 72-84 months, and you’re stressed the hell out. You’re not alone.

Good news: there’s a solution! It might be tough and it’s going to take time, but if you’re ready and motivated to make some positive improvements in your financial situation, you’ll be glad you started.

Get your mind right. As in, know and believe you can achieve financial success. You have to have some level of belief and the desire to do so, or excuses will dominate.

Assess The Damage. Use a budget tracking system to track the money you’re bringing in and the money that’s going out. This can be something as simple as pencil & paper, excel spreadsheet, money tracking app, or whatever it will take to get you to actually do it. Be honest and exact. This works if you’re entering accurate, not estimated, numbers. Once you see what’s coming in and what’s going out you can see where improvements need to be made.

Start Making Cuts. The three largest monthly expenses are usually housing, transportation, and food expenses. Lowering the cost of these three will make a drastic impact on your budget.

Housing expenses: do you need the extra bedroom in your current home? Maybe rent it out. Are you living in an expensive part of town? Moving is a huge, potentially expensive decision that must be thoroughly considered, but if you are in a situation where you are lowering your housing expenses, this would be a great benefit.

Transportation is a major expense to consider as well. Are you paying $800 a month on that luxury car you *think* you need simply to get from point A to point B? That’s all a car should be: a vehicle to get you and your family safely from point A to point B. Trade in your vehicle for a cheaper one.

How are your food expenses? I’ll confess, when I first started tracking our monthly expenses, I realized that in one month, my family of 4 (2 adults, 1 toddler, 1 baby) spent almost $1000 in one month on food expenses! This was over $300 in eating out and over $600 in groceries, for essentially just 2 adults! I was floored and immediately made a rule to no longer eat out.

Well that was a bit extreme and didn’t even last a month since it was such a drastic change, but it sparked the change. Now we’ve gotten into the rhythm of only eating out once or twice a month. This includes fast food and takeout. We’ve made adjustments to our eating, reducing both our food wastage and food bill to around $500 a month total.

Review your food expenses and make some changes. Make sure you’re shopping only once a week with a well planned grocery list consisting of only things needed for the meals of that week. Do your shopping at an affordable store and don’t always go for the brand name labels. At the end of the week, assess what foods have been used and what foods have been wasted and make adjustments for the following week.

Assess your subscriptions. That expensive cable bill you *think* you need for sports nights and kids channels? Cut it. That expensive gym membership you only utilize once a month, if you’re lucky? Cut it. The clothing, shoe, cosmetic, home goods, alcohol, gadget, etc. subscriptions? Cut them all.

Look, I’m not telling you to do something I haven’t already done. My cable has been replaced with an abundance of entertainment including Netflix, Hulu, Disney+, ESPN+, and Amazon, for a total of less than $45 a month. I cancelled my gym membership and workout using free resources through YouTube and Instagram. I went to a cheaper yet comparable cell phone provider, cut my ipsy subscription and re-evaluated my auto insurance coverage because I was that determined to financially succeed.

Make it a game and think of where else you can cut: weekly trip to Target? Cut it. Daily trip to Starbucks for the gourmet super latte? Make your coffee at home and only get the super latte occasionally. Weekly trips to the hair and nail salon? Lengthen the amount of time between haircuts and do your own nails at home.

Re-allocate all those saved funds. After you’ve sliced your expenses and created some excess in your money, the worst thing you can do is apply those funds to another expense. Instead, you must apply those funds to savings. No exception. Build up that emergency fund of at least $1000 – $1,500 immediately.

Take advantage of 100% return investing. What could possibly give a return of 100%? Sounds too good to be true? Well it’s not. It’s your employer match through a 401K or 403B retirement account. Most employers that provide these types of retirement accounts provide a match. In my case, my employer matches 50% of my contribution, up to 4% of my salary. So if I contribute 4% of my salary to my 401K, they match 50% of my contribution. So that employer match is FREE money. I don’t have to do anything in addition to saving my money in order for them to give me extra money. Take advantage.

Pay off debt. I love The Money Guy for explaining in detail why almost all debt is bad and how to go about paying off debt. They have what they call the Financial Order of Operations (FOO) which is extremely informative. Check it out here.

Build up that savings account. Start putting money away to build up 3-6 months worth of expenses. This should be saved in an online high yield savings account that is separate from your main banking account so it is not as easily accessible. Remember, this is in case of major instances only, such as job loss, illness that prevents you from working, etc. You don’t want to be able to just transfer money after an impulsive shopping spree. Knowing that money will take up to 3-7 days to transfer into your main banking account will prevent such purchases.

Hyper-Save. Once you have your 3-6 months worth of expenses saved up, start to contribute more (up to the allowable max to avoid tax penalty) to your 401K, 403B, SEP IRA, Roth IRA, HSA, Traditional IRA &/or other tax-advantaged retirement account. You can learn more on these tax-advantaged accounts in my post titled Tax Advantaged Retirement Investing.