This is a call to the motivated: Those who wish to be in control of life when it comes to health...be it physical, emotional or financial. All self-improvement requires hard work in the beginning, just as muscles hurt after returning to the gym after an extended break.
Regardless of the growing pains this may bring, by following the techniques below, you will know exactly how to manage your finances in short time, and you will reap the benefits that come from the initial small gains, no matter what income bracket you land in. So let's get started:
1) Set Up Your budget --- Identify all money coming in and going out.
I never was a budget person until I got tired of looking at my monthly bank statements with fear and agony, realizing that I was bringing in more than enough income to have most of the luxuries I wanted, AND pay the bills---but I was short on all accounts. I had no idea of how to forecast the incidentals of life, and they would come creeping in and wreak havoc on my well-being. And without formal education in this, most folks such as myself, are lost with how to begin. So I'll give you the shortcuts I've learned over the years.
First thing I did was I went and spoke with a good friend of mine who is amazing at budgeting. I asked him for his secret to managing finances. He told me it helps to be obsessive about all money that's coming in and out. He would forecast out an entire year, all of his automatic, recurring expenses, from the annual Amazon Prime membership, to the monthly charges (Netflix, Spotify, etc.) and so he gave me a simple template using the Apple Numbers app, that did basic addition and subtraction as I plugged in my overall bi-monthly earnings from my job, and it took away cash to pay for not just the monthly charges, but also the incidentals and the annual charges.
I realized after factoring in rent costs and all my overall expenses, there was a lot of money left over. I was surprised.
He laughed, and told me that with the combined income of his wife, he was afloat, but if he had the minimum expenses I had, he would be well on his way to financial freedom.
"So what the hell are you spending your money on?" He asked.
I couldn't answer the question. The money just seemed to go away. And so he asked me to bring up my bank statement and we looked at it together. Which leads to the second component to successfully managing finances.
2) Set Up Your "Hot-Mess Fund"
"How much money did you spend on artisanal beer when you went to the brewery?" He asked. And I was embarrassed to say. It was in the hundreds. Averaging $5 per can. But I told him that was what made me feel good---the beer tourism---going to the brewery and getting rare beers that I could share with family and friends. He laughed again, and told me that was great. But instead of blowing a huge wad whenever there was a crazy beer release, I should set aside a specific amount to go toward artisanal beer, every month, and I would go once, and savor the process even more, knowing that I would now have money set aside for all incidentals, AND I would be building up funds in my emergency fund, after all bills were paid. My friend told me to call this money my "fun fund"---and I told him not to judge me, like I was some sort of hot mess. He told me life is short, and everyone needs a "hot-mess fund" or there is no sense in working, to simply pay the bills. There's no life in that. Everyone has their vices. And they all serve a purpose in regulating happiness. In other words, it's necessary. And no one is in any position to judge anyone else.
"What's this $60 charge here from last month?" He asked. It was for a service for web hosting I no longer used, and it was auto-charging me. He told me to go and cancel it today. I told him it would be hard because I had to do it over the phone. He told me to do it. So I did it. And cancelled it in a phone call that took 10 minutes. I wrote him a text afterward, thanking him. He congratulated me for making $60 in ten minutes. I was starting to get the point. And it felt great. It was empowering. Especially when he told me I could add that $60 to my "hot-mess" fund when I went to the breweries, and get myself an extra half-case of delicious New England IPAs. I thanked him. He told me it was nothing.
I went then and got rid of almost all my auto-pay accounts, with the services that I knew I could live without. And this takes us to step number three:
3) Set Up an "Emergency Fund"
Once you've trimmed the fat with our monthly and annual expenses, and figured out how much "Hot-Mess" money you will have to blow on whatever you want per month, and still stay afloat---it's time to setup an Emergency Fund.
Some would say this is the first step. To do all you can to get $1,000USD into your savings account, or stash it in a safe---but all is to say, this is money that you do not dip into, no matter what, as it is on hand for those emergency tire replacements, car repairs, house repairs, doctors or vet visits---it's saved for the vitals to keep running, so you don't have to break the bank to keep up with your monthly expenses. This is in place so that when the unexpected comes (which it always does), you are prepared. So put aside chunks of your "Hot-Mess" fund, sacrificing some artisanal beer for a month or two until this cash is set aside, and then go to town, building up your other accounts.
Bonus Tip: Be Creative with your Savings.
You can set aside funds after your bills are accounted for, to pay for a property you've been eyeing for years, but never had enough to purchase it before. You can spend it on an extra vacation that will bring great relief to you and your family. You can pay off your loans faster. Cut through debt. Be creative. And feel the relief it gives, knowing you are budgeting your life. You are providing for yourself and others. You are a success. Feel this. Notice how it sustains you. This is the wealth mindset.
And if at any point the amount of money coming in isn't enough to pay for rent and basic expenses, you need to reassess spending, and make some major eliminations. They may hurt at first, but it will benefit you (and your credit score) in the end.