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IT'S TIME ALREADY!
HOW TO BUILD A PATH TO YOUR OWN FINANCIAL FREEDOM
By Khadijah Smith
Trafford PublishingCopyright © 2013 Khadijah Smith
All rights reserved.
THE LONG HAUL
Life is longer than most people want to admit. It's easier to say that life is short. That way we can tell ourselves that it's okay for us not to achieve everything in life because life is simply too short. A little unknown secret is that with financial control it becomes easier to see that life is long and that we control what is done with the time we have on this earth. Get ready for the long haul. Not planning because you think life is short will just leave you old and wishing you would have realized just how long of a life you were going to live. Rewind or fast-forward, and I bet you would make long-haul choices more often!
It's important that when you decide to gain financial stability, you allow yourself to think in terms of long-term goals and not just paying your car payment for next month. It takes understanding, and you will need to realize that time will go on and that you need more money and good credit to sustain economic changes in society. If you live paycheck to paycheck, how can you see past next payday? You have to tell yourself that the decisions you are making today will put you in a better situation in the near future and that what you do today will have an impact on tomorrow.
I know that many of us don't like to stop and write things down. We think we know everything and can remember all things. Don't underestimate the power of sight. When we write things down on paper, this allows us to see exactly what we think we already know. In most cases we find out that we thought something was completely different than the actual situation eventually revealed. We always think we have money, and then we get declined at the cash register and have to try a different card. We thought we have the money, but in reality we do not. This is why budgeting and writing things down are very important. We have to see the big picture in order to get the big picture, and that means you have to want to write down your finances and you have to want to stick to a budget. Budgeting is fun if you do it right; you are able to find extra money to spend how you see fit. Most people would say that they hate to be on a budget and that it limits them in the lives they want to live. The truth is that a budget allows you to live a more mentally peaceful life, a life where you understand and know your own finances. Do you know your net worth? Do you know what your monthly income is? You should answer these questions as you read this, but if you can't, most likely it's because you don't write your finances down. I laugh when people tell me that they don't have to write down anything because they're sitting around wondering why they are broke. I normally respond to friends by saying, "Dummy, that's why your butt is broke." If you don't know what you make and don't see the amount of bills you pay monthly on paper, how can you manage your money? You can't. The power is in sight, which leads to shock and disbelief once you lay it all out in front of you. Push yourself into an intervention. Force yourself to look at your entire financial situation all at once. Take it in, digest it, and then accept it. Understand that you can get your finances in order, but first you need to face them.
Once you master the art of designing and maintaining your personal budget, you will be able to better utilize your finances to your advantage. Improving your credit score and becoming a home owner are just a few benefits of maintaining a balance budget.
The first thing you need to do is spread all your monthly bills out in front of you. Then use a regular piece of paper or a financial software program. List all your bills out and the amounts of the bills. Next pull out your pay stub and all other household income documentation. Calculate all the income and put that figure into your list (budget). Next I want you to pull out all your current bank statements and go through them and find all your gas charges and miscellaneous charges for the last two months so that you can figure your average monthly expense figure and plug that number into the budget. Then I want you to think about the household and anything that you spend money on monthly. For example, do you have any animals? Do you pay for parking? Do you have a home warranty? Any and everything you spend money on monthly should go on your budget list. Then make three columns; label them "Budget Amount," "Actual Amount," and "Difference." At this point your paper should look something like this:
This exercise is going to allow you to stop and see exactly where all your money is currently going. This is where the first change is going to happen. Allowing yourself to see where you are going over budget will help you take steps to save money and spend it where you really want it to go. Once you become good at setting your budget, you will get better at controlling your expenses. Like a domino effect, when one thing changes, then you begin to see the big picture of controlling your finances.
Next I want you to get another piece of paper. For this exercise we are going to look at your income. Write down how much money you take home after all your payroll deductions are taken out. Try to use an actual pay stub when you are doing this exercise because we want to get exact numbers. Then I want you to take out your taxes for the last two years and write down the amount that you are showing on your W-2s from work. This will allow you to get an average annual income so you can begin to track your pay increases and see at what rate your income is growing in relation to your expenses. Once you get your monthly take-home income, plug that number in to see what your total leftover income will be based on your new budget. If the difference between your monthly income and your monthly expenses is positive, then this is the amount that you deposit into your saving account monthly. You do not need this extra money. You can save it for vacations or major purchases. Remember, that is why we budget to find extra money: so we can make that money work for us. If the number is negative, that means you need to go back and fix you budget. Start with the areas of extras. Most of these areas are based on what you want to spend, so it will take some sacrifice at first, but I promise it will get easier. The good thing is that you are in control and that you have the power to make the necessary adjustments where and when they are needed. In doing this you will ensure that you stay on track for success.
Maybe it's time to think about a new job or career to gain more income. You may even consider starting a business if the numbers you are seeing are not what you want for your life. You have to see it on paper to make the connection in your mind. Don't play games with yourself. You can't keep running from yourself because you follow yourself everywhere, and let's face the facts—it's a "till death do you part" type of relationship. Stop and think. If I could just get this money thing understood and under control, I could—what? It's your job to complete the sentence. Everyone I talk to can fill in the blank with multiple answers, and I'm sure you can as well. You are the only one that can release yourself from your own mental jail. Release yourself from this financial prison sentence, and I promise that you will look at money in a whole new light. You will be able to see how laws and regulations can benefit your situation. You will be able to see that there are real opportunities in the world waiting for you to take advantage of them. If the money is funny, then it's time to get serious. If the money's not quite right, then it's time to get it right.
Set up accounts for the top two areas of importance in your life. For example, you may want to prioritize education and retirement, or you may possibly want to start a business. The rest of your income is for you to spend how you choose based on your budget. These two accounts will be your only true savings accounts. There are accounts we call "savings accounts," but if you are constantly pulling money out of these accounts, then they are not really storing money that you are saving. So if you want to save for retirement, money goes into this account until you retire. This is up to you, but I caution you that if you can't make real decisions about the labels you place on the things you want, then you need to check yourself and quickly. If you want to go on vacation, then set up a savings account and put money into this account until it's vacation time. Then you can't say that you don't have the money or give any other excuse when the time comes. Of course you will need to find out how much you need to deposit monthly to set the goal. That way you will have enough saved for vacation, but that is the whole point—to plan for a vacation!
Ask yourself, "How many times have I bought the same thing once?" The answer will probably be this: "Never!" We all buy the same things over and over again. When you remind yourself of this little-known fact, it will help you to stop the unnecessary spending. The fact of the matter is that you can't keep spending money the way you do if you want to achieve a different goal. You can't keep spending money at the store every day just because you want to. Of course you can, but that also means that you can't save money and start spending on the things you say you really want in life. When it comes to food, we can also apply the same kind of reminder to eating out. How many of the same burgers can a person really eat? Or how much can you have of whatever you overindulge in? Just because our brains tell us that we want a certain kind of food, we must also remember that we can control our actions and tell our brains, "Look, I know we want to get this yummy food, but we cannot afford it today." Do that every time you exceed your food budget. Then sit in silence and dine on the memory of what that food tasted like. Don't laugh. Okay, you can laugh, but this does really help. It's true that it takes about five minutes to really get over a sporadic craving. A sporadic craving is when you all of a sudden just have to have something. It can be anything—a pair of shoes, a good lunch, a bet. This craving can strike when you run into Wal-Mart, even if you were only going to get one item. You may end up with a full cart. This is a result of a sporadic craving for miscellaneous items that you really don't need and could have done without. By following these little tips, you will quickly see an increase in your saving ability.
In order to save money, a person must first find money that he or she already makes and turn that money into active savings, the kind of savings that you see in your hands and not just on paper.
BAGS FULL OF MONEY: SAVING IS A SKILL
Once a person can find money to start saving, then he or she can come up with a plan concerning how to continue to save money and what to do with the money. We buy clothes after clothes, games after games—the same kinds of gifts for Christmas and other holidays every year. It's time for a change! Save your money to buy new things, better things!
It never ceases to amaze me when people make poor decisions but still look for positive results. They do the same thing but look for different outcomes. This makes no sense whatsoever. The same people are quick to point this flaw out in others but avoid looking in the mirror to diagnose their own decisions.
Stop and think! We're always looking for advancement, right? But are we ready to listen to the advice and actually use it. Well, if so, listen up, because this is a good one!
Change your spending habits so you actually change your spending habits! Tell yourself, "I'm going to spend money today. I'm in control, and I'm not spending money on something I already have or the same thing I bought yesterday." Every time you want to buy something, remember that you don't have to and instead write down what you wanted to buy and how much that item would have cost you.
Based on this chart, if this person gave in to his or her sporadic carving, the individuals would have spent a total of $169.73, and that total only pertains to the things the person told him or herself that he or she wanted but did not get. I use these figures just to get my point across and show you how this process will quickly allow you to identify where you waste money. I say waste because these are impulse purchases. You don't need some things, but your brain may tell you that you want them now. Tell yourself, "I'm not spending money today, not because I just want this right now!" If you are a parent or have a friend who has children, then you know that kids don't get everything they want when they want it. Apply the same rule to yourself. You're the only one in control of how your money is spent. Tell yourself that you can't have everything you see when you want it. Remind yourself that you have a bigger plan and dreams to accomplish. Empower yourself!
I want you to get three bank statements out and highlight every transaction that includes things like food, soda, and other extras. Now add them up to see how much waste you have spent quarterly.
If you're spending $5 a day for 365 days, the truth is that you're wasting $1,825 a year. If you're spending $15 a day, the truth is that you're wasting $5,475 per year. That's more than an average income tax return for the year! We always look at our W2's at the end of the year and wonder where all the money went. Now slap yourself and get it together!
Stop it and change it! If you can just flip it, then you can pay yourself that same money so that you can afford your own vacation, pay off debt, or even buy a home.
Organize your life. This makes for easy money management. Stop using paper, get online banking, and "bill pay." Buy in bulk. Stop breaking down your money and running back and forth to the store. This saves on gas and saves on unnecessary spending, which always happens when you go into the store.
Stores are set up to suck you in and get your money! If you don't already know it, businesses spend big money on marketing designs and software just to set the store up in a way to maximize their profits and your spending ability. Every corner and item in the store is placed in a specific spot just in the hopes that you will walk by and pick it up. Stay away from the stores when you are trying to save money. By not going, you are saving money!
Reorganize tithes at church. Speak with your pastor and let him or her know you will tithe quarterly based on 10 percent of your disposable income. After you pay your bills, if your total is $500, you will tithe $50. Track it for three months and then write a check to the church. Many people will not be happy about this comment, but it is true. If you are not serious about taking control of your finances, then you're not living the best life you can live, and tithing at church just to make yourself feel better is not the answer. You should be able to give freely to God, not make life decision when it's time for offering, you should already be prepared to give and can give without guilt in your heart. I know too many people who are struggling but are always commenting about how much money they give to their church. Why are you giving so much to a church but not giving anything to yourself and your future? You need to donate to your church and other organizations based on the money you have left over after you have met all financial responsibilities, and you can donate that 10 percent on a quarterly basis. God wants us to be happy and whole. Being unhappy and living in financial ruin is not God's wish. Get your household together and then donate accordingly. Do what works for you and your life, let's face it, we already give what we want to when we want to no reason to beat yourself up about it, either you got it or you don't'.
Get a big plastic water jar and put all loose change in it and cash it in every three months. You should have plenty of extra money after a year of saving spare change. Use this money to buy birthday and holiday gifts.
If you look in your purse or pockets and you have a lot of loose change, this is a key indicator that you are spending too much money. Every dollar or big bill you are breaking while you are spending money turns into a lot of loose change. Check yourself. If you have more than three dollars in change on you at all times, you are spending too much money! Put that change in your jar and stop spending!
Excerpted from IT'S TIME ALREADY! by Khadijah Smith. Copyright © 2013 Khadijah Smith. Excerpted by permission of Trafford Publishing.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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