Welcome back to the blog!
Today we are talking about personal finances and I’ll be giving you 5 steps that will help you gain control of your finances step by step (in 5 posts). By the end of this post you should know where you stand in regards to your debt.
You’ll know how much debt you have, who you owe, you’ll have an idea of how long it would take you to pay it off if you pay the monthly minimum amounts, and you’ll be in a better position to determine the best debt repayment plan for you.
If you are ready to start living your best life but your finances aren’t quite there yet, try implementing the steps I mention below so that you can work towards getting your finances in order.
If you’re interested in diving deeper and want to read all my tried suggestions of getting control of your finances, you can purchase my ebook called: How To Gain Control of Your Finances.
I created this ebook after I implemented the steps myself, so I have personal experience. If you want to learn more about the financial struggles that I experienced in the past, I would recommend that you watch this YouTube video.
You can also read this post, where I first mentioned my goal of becoming financially independent. I started my journey with over $30,000 of credit card debt, an auto loan, student loans, paying rent and other living expenses with a salary of $45,000.
As a result of starting my financial independence journey in 2018, I’ve transitioned to higher paying jobs (doubled my salary), paid off over $50,000 of debt, saved a nice amount of money through multiple avenues, and learned new skills that have provided additional streams of income. I even took time off from working and had a 6 month mini-retirement.
My journey hasn’t been easy but I’m super grateful for all I’ve experienced and the people who have helped me along the way.
Let’s begin by exploring the first step!
Know Your Numbers
First and foremost, it is important that you have a solid foundation. Think of your financial journey as building a house or even a pyramid. All the steps are important but you you’ll start at the bottom with the foundation.
The purpose of a foundation is to bear the load of the structure. Knowing your numbers sets you up so that are aware of what your starting position should be. Meaning, how much money do you need to have in order to start your journey on the right foot?
Knowing your numbers allows you to be aware of how much you need to bring in monthly in order to cover all your debt.
You will need to know all the people or creditors you owe money to, how much you owe, the interest rate, the monthly payment, and the due date.
This may seem like a lot but it’s what you need to do so that you can get in a position to start changing your mindset, money habits, and get in a better position financially and reach your goals.
A helpful place to start is your credit report (not to be confused with your credit score). Review your credit report to see who you owe and the balances for each debt.
Please note that all of your expenses won’t be on the report (think rent, utilities, insurance, etc.) but it should give you a lot of information you need. You can also (and should) use this time to review and make sure the debts on your report are accurate and yours to begin with.
- List all your creditors
- Write down the balance owed (total amount you need to pay)
- Write down the monthly payment or minimum monthly payment
- Write down the interest rate
- Write down the due date
- Estimate how long it would take you to pay if off if you paid the minimum monthly payment by dividing the current balance by the monthly amount due. (This is just an estimate (eye opener) since this doesn’t take into account the interest rate). You can use an online debt payoff calculator for a better estimate)
To make this an easy task, I’ve created this debt payoff list that you can fill out. You can get it in my store here.
Now that you have all of this information in one place, you can add up the total balances and total monthly payments and compare that to how much you actually bring in on a monthly basis.
This will tell you the health of your finances, do you have enough income to cover your debt plus your other living expenses?
This can be a huge eye opener; it was for me. It proved that I was overextended, meaning I had more expenses than I can afford. It explained why I had missed some payments and was struggling to make ends meet in addition to other bad money habits.
This isn’t the end though. You can change your financially situation! You should now be in a position to clearly see how much debt you have and how much your monthly obligations for those debts are.
Now that you know this, you can see what side of the playing field you are on.
Do you need more income or do you need to adjust your monthly spending habits?
Either way, I’m here to help you on your journey, stayed tuned for the next blog post to see what the next step is!
Until then, join the Royal Family to learn more about my personal journey and get exclusive tips.
See you in the next one,