Step by Step Financial Independence Tutorials

5 Steps To Take When You’re Overwhelmed With Finances

You come home from work exhausted and frustrated – Overwhelmed with finances

It seems no matter what you do you’re trapped in a paycheck to paycheck cycle with no end in sight. Sometimes you wonder if this is really it. Is this what you envisioned for your life? Here are 5 steps you can take to break free. It will take work. It will require change. And it will not happen overnight. But your future self will look back and thank you.

  • Keep Calm And Carry On

Don’t freak out! You have to trust that it is possible. If you want to make a change then you will make a change. The answers are out there and so are the resources. But if you come apart at the seams you will forfeit. You will remain in the cycle until you have faith that by following a plan you can get from where you are to where you want to be.

  • Make A Plan

Living a financial life without a plan is like riding a stationary bike. You can push so hard you collapse or you can pedal along at a steady pace, but you’re not going anywhere! Ride for hours and wind up exhausted and right where you started. But how to to begin! It can be overwhelming at first but let’s break it down. Make an income statement and keep diligent track for a month. Create a simple spreadsheet with two columns for incomes and expenses. Document every single expense no matter how trivial. This will help you when you get to making your budget. Each cup of coffee, fuel, haircut, and takeout chinese order. Every single student loan, credit card, and insurance bill. All recurring payments, phone bills, and rent checks. By doing this you will develop a real understanding of where you’re money actually goes! Figure out what can be reduced, reused, or eliminated altogether. We’ll go into that in another post.

  • Stick to The Plan

This might be the hardest part. After you have taken the time to understand your financial position and made a budget, you have to stick to it! Studies show that most Americans don’t keep a household budget. And the ones that do often struggle to stay on track. It’s hard, it can be restrictive, but when you see the money adding up in your savings account, you can sleep at night knowing you can cover rent or an unforeseen engine mishap with your car. That’s when you’ll know it was worth it.

  • Focus on Eliminating Debt

There are two priorities one of which should be eliminating debt. It’s hard to take on new responsible loans for a business or mortgage if you’re already swamped with credit card and student loan debt. As you streamline your income statement to have extra cash every month, pay whatever you can toward your principle. You’ll wind up reducing the overall cost of the loan and you’ll be that much closer to world domination.

  • Focus on an Emergency Fund

The other big priority is having an emergency fund. A good rule of thumb is enough money in a savings account to cover living expenses for 6 months. You will be blown away by how much stress can be eliminated from your day to day life with an emergency fund. Car broke down? You can handle that. Emergency room visit? No problem (hopefully). Bachelor party in Vegas? Well… be careful!

By understanding your financial position, creating a budget, sticking to the plan, eliminating debt, and establishing an emergency fund, you should be able to go from overwhelmed stress ball to ball of fun in no time. Happy budgeting!

What do you thin?

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