The ABCs to the XYZs of better finances

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Financial education is difficult so let’s start with some easy concepts.  By no means an exhaustive list, your friendly firestarters have compiled a list of things to remember in your journey:

A- Allow yourself to make mistakes. A common occurrence when trying to change your financial life is to expect perfection. Statements such as “I’ll never eat out again” or “I can live on $2,000 a year and pay off all my debts” only set yourself up for failure. You need to be realistic about your current financial situation and set reasonable goals. You will make mistakes. You will overspend, underearn or overdraw your account on occasion. But the victory comes in reducing the frequency and financial ramifications of these mistakes and learning from them.

 

B- Be aware of where and how you spend money. At least half the people  who express their financial problems have said at one time or another “I just don’t know where it all goes.” Take a good long hard look at your life. You are (presumably) an adult who works hard for the pay your company dispatches. Take responsibility for your earnings and budget your money according to your needs, future and wants– in that order

 

C- Command control of your financial life. It’s so much easier to sit on your friend’s couch and bitch about how hard life is. Your parents wouldn’t buy you a car when you turned sixteen. You had to go to college to get a decent job. Nobody told you how much you pay in credit card interest. Houses are just too expensive in your area.

Fine, whine then.

But for every minute you waste being a whiner you’re not getting a hold on your financial state and doing something about it. Mistakes are in the past, identify them, learn from them and commit to not making the same ones in the future.

 

 

X- (e)Xamine your (e)Xpenses.  Don’t be afraid to go after contracts, memberships, even your food budget with tenacity.  You’ll come away knowing exactly what you spend and where.  Looking at your budget should be an exercise in aligning your goals with your spending.

 

Y- Ask yourself Why often. This piggybacks on X above and should be utilized in a lot of common situations.

Why do I have premium cable when I work most of the day and then would rather watch movies?

If I talk an average of 300 minutes a month why does my cell phone plan have unlimited minutes?

Why am I considering sending a birthday present to a friend 300 miles away who I have not talked to in two years?

Why do I continue to bail out my friend/kid/husband/sister/father when they never learn and always come back for more money?

 

Z- Be prepared to Zig Zag toward your goal. A monthly budget that has consistent allocations for each category is somewhat of a mystery in my mind, somewhat akin to Bigfoot: very elusive. One month you may sock away a few hundred in savings, the next month paying double on a student loan, in six months you might be aggressively saving for your Roth. The goals business in personal finance is all about keeping the plates spinning. It’s easy to over focus on one aspect of your financial health and ignore the rest. Like people who refuse to eat carbohydrates but consume too much salt, fat and calories and refuse to exercise.

 

In addition to zigzagging along, making your goal one month and falling short the next, you should be tracking your progress so you know when to zig and when to zag. Remember, dollars are scarce and every $1 you use to pay a bill is a dollar that won’t go into savings. Every dollar in your savings doesn’t go to debt. It’s a constant battle. Some days you’ll feel like a triathlon athlete who gets it all done in perfect time. Other days you’ll feel like the American Gladiator atop that mushroom being beaten with a giant q-tip from every angle.

 

Take a deep breath. Relax. Just like a kid learning your ABC’s it takes awhile to get down the XYZ’s but you’ll get there eventually.