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There are a million reasons you may want to become a money boss.
You most likely have some sort of money goal, even if you don’t know you do.
You want to plan an awesome vacation. Or save more money for retirement. Perhaps you’d like to stop living paycheck to paycheck. Put your kids through college, save for your daughter’s wedding.
This is my personal favorite: stop stressing about money altogether. Just lift that weight right off your shoulders. Sweet freedom.
It can be done. It’s not easy, but it is simple. And 100% worth it.
1. Set A Goal
Figure Out Your Why
Before you do anything else, you’ve got to figure out your “why”. You’ve probably heard this before. It’s true for just about any aspect of your life.
Why do you brush your teeth every day? When you were a kid it was because your parents told you to. Now that you’re an adult, it’s probably because you don’t want bad breath and gross rotting teeth. It’s not because “you’re supposed to” or someone is making you.
If you’re reading an article called “4 Simple Steps To Master Your Money”, you probably already have money goals. Or you do and you don’t realize it.
Now is the time to realize them! Take some time and really think about it. Not what you would do if you won the lottery, but what do you want to achieve with your money life right now.
Why do you want this? What will achieving this goal do for you? What’s your main motivation?
Already have money goals? Lovely. Take another good look at them. Get excited about it. What is going to keep you on track when you’re tempted to stray down another path?
That will happen, I promise, but you don’t have to cave. Remember why you’re doing this, why it’s so important to you, and you’ll stay the course.
Make It Specific
“Save more money” is not specific. That’s a cop-out goal. It gives you an out.
Technically if you save $13 extra dollars this year, you achieved the goal. I’ll bet that wasn’t what you had in mind when you said to yourself, “Self, we’re going to save more money this year!”. But since you technically did save more, you don’t have to wallow in self-pity since even though you didn’t really do what you wanted to do.
I don’t ever want you to wallow in self-pity because that achieves exactly nothing. It’s not helpful in any way, so just skip it. But, that doesn’t mean you don’t own your mistakes and hold yourself accountable.
A few examples of specific, measurable goals:
- Save $1,000 in the next 3 months
- Pay off my credit card ($xxx balance) by October
- Buy my car with cash
- Fully fund my 401(k) this year (aka contribute the max limit of $19,500 (in 2020) to my 401(k))
Specific and measurable goals are very straightforward. You either did it or you didn’t.
2. Make A Budget
We’ve got the 50,000 foot view covered. You’re feeling really good about your why and your goal.
The 10 foot view, and the how of achieving your money goals is making a budget and following it. There are many ways to skin that cat but regardless of which one you choose, they all boil down to this:
MONEY IN > MONEY OUT
Ultimately, the amount of money you bring in, in any form, needs to be greater than the amount of money you send out, to any place.
I know I know, there I go again with brand new, earth shattering information that no one has ever known before. You’re welcome.
But seriously. I can’t think of a situation where this isn’t important.
Even if you don’t think you have any money goals at all. You probably still want to, or need to, pay your bills and buy food. That’s it. That’s your money goal. To be able to pay all your bills and put food in your belly.
Let’s say for the sake of argument you have the intention, consciously or unconsciously, to have your water and electricity work (aka you paid your bills and they didn’t get shut off) and you want to be able to eat on a regular basis. Probably over a long period of time, like your lifetime.
In order to sustain that for your life, or even several years, you need to have more money coming in than you do going out.
Or at least they need to be the same.
If you have no other financial goal whatsoever other than to pay your basic bills, your money coming in needs to at least be equal to the money going out. You may be able to have money out greater than money in for a little while, but I assure you, it’s not sustainable for the long term.
If you want to take a vacation or ever stop working and retire at all at any point in your life before you die, we’re back to money in needs to be greater than money out.
Now that that horse is dead, I’ll step off my soap box.
How To Make A Budget
The basic overview to making a budget:
- figure out your after-tax income
- track your spending (figure out your expenses and where all your money is going)
- set a plan for spending before you spend (ie: at the beginning of the month/pay period, not the end after the money is gone)
- don’t forget: money in needs to be greater than money out
- be realistic
- set money aside for savings/emergency fund, even if it’s just a little bit
- don’t forget about infrequent expenses (annual fees, car registration & maintenance, birthdays, holidays, insurance payments, etc.)
- account for unexpected expenses (they always happen and if they’re not planned for will derail your budget!)
- follow the plan!
That’s obviously a very simplified outline of creating a budget.
I’ve written several posts about budgeting, apps for budgeting, and money allocation. Instead of getting into the nitty-gritty all over again here, I’ll link to some helpful posts below.
- My favorite budgeting platform, the one we use: You Need A Budget
- Budgeting Apps: You Need A Budget, EveryDollar, Mint, Personal Capital
- Zero-sum Budgeting
- Why We Started Budgeting
- Tracking Your Spending vs. Budgeting
- How To Calculate Your Savings Rate
- Free Money: High Yield Savings Accounts
- The 50/30/20 Budget
I’m also quite confident I’ll continue to write about budgeting and related topics in the future, so stay tuned.
If you have specific questions that I haven’t answered somewhere on this blog, drop a comment below or send me an email (firstname.lastname@example.org) and I’d be happy to help!
3. Meet Yourself Where You Are
I alluded to this in the “be realistic” bullet point above.
This is super important.
When you’re trying to adjust any habit you have, trying to will-power yourself from zero to hero in one step is not helpful for most people. Instead, get off the struggle bus and take it one step at a time. Will it take longer? Probably. Will it stick better and suck way less in the long run? Absolutely.
Let me give you an example. If you’ve tracked your spending and learned that you spend $1200 a month on food for your family of 4, trying to slash that to $600 in one month is probably going to be a huge challenge.
If you can do that all at once, that’s excellent and do it! Some people will absolutely be able to make big sweeping budget changes and keep them and feel really good about it.
There are also a lot of people who that just wouldn’t work for. Know yourself and your family. Set yourself up for success.
If you’ve never meal planned or don’t regularly cook at home, baby steps may serve you better. Instead of setting your grocery budget to $600 and potentially setting yourself up for failure, find one change you know you can make right now that will lower your food cost and do that.
After successfully implementing your one change for the month, your food costs will be lower. You stuck to your plan instead of dropping it a week in.
You’ll feel a sense of pride and accomplishment instead of failure and like a lost cause.
Make a few realistic changes each month and take small but very real steps forward, toward your goal(s).
This will create lasting changes instead of white-knuckling it through a slashed budget for a few months and potentially end up slipping back to your bad habits.
4. Review Regularly
This. Is. Key.
Review your plan and your goals all the time.
You have to review your plan and your budget regularly. Set a standing meeting with yourself if it’s just you, or you and your spouse/partner/family and review the plan. They don’t need to be hours upon hours.
A few minutes to review your money will be just fine. Perhaps every Sunday evening you sit down and take a look at how the previous week went and the coming week ahead.
Be sure to acknowledge your wins and what went well and be proud of it. Also, look at what could have gone better and adjust as necessary for going forward.
Don’t dwell on what you did wrong and beat yourself up about it. Recognize it, own it, figure out what happened and what you could have done better in that situation, and then move on.
You may have been bad with money in the past, but you’re learning to be better with it now. Remind yourself of that!
During your budget parties talk about your big WHY, too. It’s hard now, but anything worth having or achieving is hard.
Famous Last Words
You can do hard because you’re awesome, and it will be so so worth it.
Just making progress towards your money goals is such a relief and so empowering. Even if you’re not in a ton of debt or stressed about money now, you just want to save for an epic vacation or a fancy car.
Knowing you have a plan and are taking steps to actually get there and it’s not just a pipe dream is super exciting and motivating.
Then when you actually get there, you’ll feel like the king/queen of the world.