In this post I’m going to show you how to fix your financial problems and finally get ahead.
After all, there’s a reason you’re reading this post. And I’m guessing it’s because you’re sick and tired of financial struggles. You know, the kind where getting your paycheck means putting your subtraction skills to work, and praying there will be a little money left over for savings.
I’ve been there.
I know what it’s like to live paycheck to paycheck. I’ve made bad financial decisions and had to live with the consequences. I’ve taken a ride on the Financial Struggle Bus, and it was a bumpy, nauseating trip.
But I conquered the struggle, and so can you.
So, enough with the jibber jabber, let’s get right to it.
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Take Ownership Of Your Finances
I hate to break it to you, but you are responsible for your current financial situation, and you are also the only person that can change it. Nobody else is going to do it for you.
Additionally, the sooner you accept the fact that your finances — good or bad — are a result of your past and future choices, the quicker you will find your way to the winner’s circle.
So, look back into your past, and figure out what you could have done differently to change the outcome. Then, do it now; better late than never.
For instance, if you are buried in credit card debt, look back and figure out what could you have done differently that would have resulted in a better financial situation? If you could go back in time, and prevent yourself from using credit cards, would you do it? If so, shred your credit cards right away. You know they result in struggle, so don’t make the same mistake twice.
Or, perhaps you ran into some unexpected medical bills? This is a tough one, because while medical emergencies may be out of your control, you still need to be financially prepared for them. So, what amount of money would have prepared you for that situation? Take action by making that number your goal, and a top priority in your financial life going forward.
Begin With The End In Mind
If you want to fix your financial problems and finally get ahead, you first need to define an end goal. Otherwise, you’ll just be wandering aimlessly.
Think of it like this; you can’t plan a trip without a destination. If you did, it would be impossible to make a plan to get there. And, how would you know when you’ve arrived?
In personal finance you need concrete goals to direct your path. You need milestones with dollar signs and numbers to chase after. You need a financial destination. So, set one!
Define what financial success look like for you. Then, define a series of concrete milestones that will act as markers along your financial journey.
To illustrate, if your version of financial success means getting completely out of debt (including your mortgage), and having a net worth over one million dollars — you have your destination. Now, all you have to do is set your milestones.
For example, your milestones might look like this:
- Get out of credit card debt
- Pay off car/personal/student loans
- Save up an emergency fund to cover six months of expenses
- Pay off the mortgage
- Invest in mutual funds until total combined assets crest $1,000,000
Get On A Budget (Your Roadmap)
Now that you have a destination in place, and milestones to mark your way, you need a plan; or as we call it in personal finance, a budget.
To continue with my previous metaphor; if you’re taking a road trip, you need to define the route you will take to get there. In other words, you can drive around aimlessly and hope to eventually reach your destination by chance, or, you can set a defined course and get there as fast as possible. I hope you choose the latter.
With a budget, you can work backwards from your end goal, to figure out exactly what you have to do to reach your financial destination. Your budget will keep you on track, and give purpose to every dollar you earn.
If you’ve never made a budget, or you need a refresher, be sure to check out the following posts:
Destroy Your Debt (Forever)
In more cases than not, financial problems can be traced back to debt. Whether it’s: medical, credit cards, student loans, car loans, mortgages, business loans, or any other type of debt, owing somebody else money does not lead to financial success.
If you want to fix your financial problems, and finally get ahead, you need to kick your debt to the curb, and shun it forever. This is no-negotiable.
To put it plainly, wealthy people earn interest, and broke people pay interest. Therefore, if you want to be wealthy, get out of debt as fast as possible, and never go back into it.
Crank Up Your Savings
For most people, saving money is the last item on their financial list. They spend money on expenses — necessary and unnecessary — and at the end of their pay cycle, save whatever money is left over. However, this is the opposite pattern of the wealthy.
If you want to fix your financial problems, you need to save first, and live off of the remaining money. Then, if you have any left over money at the end of your pay cycle, save that too!
Just remember, your savings is meant to be left alone. So, if you constantly find yourself dipping into savings, read our post, How To Save Money and Not Spend It.
Invest For Long-Term Stability
I’m sure this isn’t the first time you’ve been told to start investing, but there is a lot of misguided information out there. And to be frank, a lot of it is just plain terrible.
The last thing you need when you’re trying to fix your financial problems, is to take the advice of some guy living in his mother’s basement, spouting off about the perfect penny stock picks for that day.
High-risk investing, when you already have financial problems, is a terrible idea. Instead, you need to practice consistency, and focus your investments on long-term stability.
With that in mind, one of the best places to start investing, is index funds.
An index fund is a mutual fund that is structured to mimic a particular index. For example, investing in an S&P 500 index fund, means your money will be spread across all — or nearly all — the companies in the S&P 500. Therefore, your investment will do whatever the S&P 500 does.
The real benefit of index funds is that they don’t require much maintenance which in turn, keeps their expense ratios really low. And low expenses, means more money in your pocket as the investor.
If you’re interested in index funds, I highly recommend The Little Book Of Common Sense Investing by John C. Bogle. He is the founder of Vanguard Group, and actually invented the index fund. His book will tell you everything you need to know.
Get Intense (Write and Inspiring Story)
If you want to fix your financial problems, there’s a price to pay. You aren’t going to see massive success without massive effort. So, get intense about improving your financial future.
And when I say intense, I mean eye of the tiger, Rocky Balboa intense! And the more financial problems you have, the more intense you need to become.
I know a lot of people will tell you that you can escape financial trouble, while also living comfortably and being lazy, but it doesn’t work. They’ve either never been through it, or they’re lying.
So, do what it takes. Cut everything from your budget but the bare essentials. Work two jobs until you’re completely out of debt. Make it hurt. And make it memorable. That way, the next time you think about repeating a bad financial decision, you will remember the price you had to pay, and run in the opposite direction.
Track Your Progress
Have you ever heard somebody say, “We’ve come this far… We can’t quit now!”?
When you’re on a long, difficult journey, the progress you’ve already made can be your greatest source of motivation. And when you are on the long journey of fixing your financial problems, you need to muster every ounce of motivation you have in the tank.
This is exactly why you need to track your progress.
Whether that means coloring-in a debt-free thermometer every time you pay off a new debt, or adding a link to a paper chain for every dollar you pay off, do something. It doesn’t matter how silly, or juvenile it seems.
Your progress is fuel. Force yourself to acknowledge it.
Persist (Even If You Make Mistakes)
I can almost guarantee that at some point in your journey to fix your financial problems, you are going to make a mistake. But that is no reason to quit.
Your ability to persist is the only way you will succeed. Remember, your goal is not to achieve perfection. Your goal is to fix your financial problems.
So, if you make a mistake, learn from it, do what you can to make it right, and then keep going.
Read About Finance
Educating yourself on personal finance will help you fix your financial problems. And reading about finance is the best way to educate yourself.
Thus, reading about finance is the best way to solve your financial struggles.
I never thought I would say this, but reading has been one of the most — if not the most — positive financial influences in my life. Not only did reading help keep me motivated when my wife and I were getting out of debt, it opened my eyes to the truth about personal finance, and debt as a whole.
If you want to fix your financial problems, I highly suggest you make reading about personal finance, and subjects relating to personal finance, a consistent habit. And, I’m not talking about articles or blog posts. I’m talking about books. Actual, physical books.
To get started, check out my post, 10 Inspiring Books To Read While Getting Out Of Debt. These were the books that got me through our debt-free journey, and I’m confident they’ll help you too. They aren’t all strictly personal finance, but every one of them touches on the subject of handling your money properly.
Fixing your financial problems might not be easy, but I promise you, it’s worth it.
So, believe in yourself, take ownership, get intense, make a plan, and persist.
You can do this.