I think we all have a few friends who are known for their crash diets. It doesn’t matter if it’s a wedding or the fact that spring break is right around the corner, they have an incredible ability to lose ten pounds in two weeks.
However, this same person always puts that weight right back on. I guess eating plain chicken breasts and salad with no dressing is as boring as Green Bay, WI.
Unfortunately, the same approach to weight loss is also how most people attack their finances when starting out.
Money has been on the back burner for a while now. They have had a few times where they tried to get their finances in order with some initial success but failed in the long run.
If you fall into this category, you’re not alone. With the amount of information available today, it’s very easy to lose focus why you wanted to get your financial life in order in the first place.
I propose you start out as simple as possible and build on this momentum in upcoming months.
The purpose of this post is a road map for anyone just getting started. It’s an outline for how to approach getting your financial life in order for the first month.
Step # 1 – Get Your Finances in Order – Write Down Any Negative Beliefs About Money
Now that you’re starting to think about money, take time to write any beliefs you have about money. It doesn’t matter if the belief is good or bad, just recognize that it exists.
How your brain processes the concept of money, is based on past interactions and experiences throughout your entire life.
For example, there is a good chance you think about money the same way your parents did. This can be great for some and horrible for others. If you were raised by frugal parents, you were brought up seeing your mom in the grocery store comparing prices on five different cans of black beans or you were used to your dad turning one of his hobbies into a side job on the weekends.
For one month, just write down every belief that comes into your head about money. To trigger your memory, here are some of the most common limited beliefs about money:
- I’m not smart enough to earn that much
- I don’t have the self-discipline to save
- I don’t have the time to manage my finances
- Rich people have more problems and issues (Thanks Notorious BIG)
- I don’t want to sacrifice all the time it takes to become rich
- I hate salespeople and never want to be one
- Only poor people spend time budgeting
Step # 2 – Get Your Finances in Order – Start Tracking Your Income and Expenses
If I were just starting up, I would immediately sign up for an account with Mint or find another simple way to start tracking my income and expenses.
Tracking your income and expenses, is your one habit for the month. You don’t need to rush in to reading more finance books or doing more research online. Just start tracking where your money is going.
Step # 3 – Get Your Finances in Order – Start a Debt Snowball
If you have any outstanding debt, create a debt snowball. Fiscal Geek has a great post on how he created his own debt snowball.
If you have $1,000 in cash set aside, go ahead and start paying off your debt. If not, acquiring this small emergency fund can be your goal for next month.
Get Your Finances in Order – Moving Forward
That’s it. One habit and two simple exercises, is all you need to do during your first month. Don’t overwhelm yourself when you’re getting started.
Don’t pick up a ton of personal finance books or start reading magazines. For now, 99% of the information in them, will not be of any use to your situation.
Of course, eventually you will get to a point where you’re going to need additional information to make a decision. However, now is not that time.