More Money Will Not Help You
You get a raise every year and you are still broke and deep in debt. Your tax refund came in and for some reason two weeks later you are broke again and piled up more debt. You are one paycheck away from financial disaster. What are your options? What can you do?
You can get a second and third job. Chances are you will spend that money, too. Go ahead and start a business. Do you have the time and patience to learn a business and make it successful? What business will you start? Will it be offline or online? Will your spouse or partner agree? Do you have the money to really invest or will you listen to some Guru and go into more debt with a venture you don’t understand. Oh yeah, you are still broke.
More money will not solve your problems. Most people get raises and windfalls and still live from paycheck to paycheck. Athletes and entertainers make a boat load of money and end up broke. More income is not a problem solver. Naming every dollar is.
I Beat Debt
I beat debt by naming every dollar and coming up with a monthly budget. I owed the IRS, the state franchise board, student loans, personal loans, business loans and credit cards. I decided that I was going to become debt free. I even put #DebtFree2014 on my Instagram photos. I picked up the book The Total money Makeover, by Dave Ramsey. I read it 5 times within 7 days and implemented everything in it. That was November 2013.
In January of 2014 I joined Financial Peace University and within 9 weeks I paid off all my consumer debts and saved over $12000. I only owe student loans. As of today I still put 20% of my income towards paying off my debts. January 31, 2015 I will be debt free.
How did I do this in such a short period? By naming every dollar. I got control of my money and I became the master of it. No longer will money control me. No longer will I be a slave to debt and bill collectors.
It will take about 90 days for you to get used to living on a budget. When I did my first cash flow plan (budget) I saw that I had an extra $500 to put towards my debts. After 90 days I had an extra $1100 to pay down my debts. I did this all with the same income.
Follow these 5 Principles I used for Naming Every Dollar.
Naming Every Dollar
Principle One: Decide to Be in Control
I made a decision to get control of my finances. Decide now that you will control your money and become debt free. You can join a Financial Peace University class in your area. Search online or go pick up a book. Decide and take action.
Principle Two: Change Your Mindset
Money is amoral. It’s neither good or evil. It is used to exchange goods and services so leave all the emotions and feelings out of it. Get rid of the myths and opinions about money.
Move from being a spender, debtor, and doubter to becoming a frugal spender, saver, and investor. Become a master of your money. Have your money start working for you. Make your money pay off debts and build wealth. Force it to grow.
Principle Three: Monthly Budget
Oh the dreaded budget word. Makes you feel restricted. Well sorry get over your fear of restrictions. Every successful business and person has a budget. Look at your last 3 months bank and credit card statements. Find out where your money is going. The last 90 days is a snap shot of your monthly spending.
This could be exciting or a horror story when you find out where your money is going. Some people are surprised when they find out how much their debt payments are. Others are shocked at the $1200 they spend every month at restaurants. People also find out that they are at a negative and are in deep financial trouble. Get over the shock and make a plan.
Principle Four: Name Every Dollar
Now to the main point of this article. Naming every dollar is the key to financial success. What does that mean? It means you know where all your money is going. You give it a name and assigned it somewhere. It also means that you start paying with cash. You feel it when you spend cash. It’s no over-spending when you use cash.
You create a monthly budget. Then you give your money a destination. Every dollar is accounted for. There shouldn’t be a surplus left ever. You spend all of your money. Now I am not saying go broke I am saying you have a zero balance at the end of the month because you assigned all your money to something.
You should not have a surplus. Surplus money that is not assigned a destination gets kidnapped by the pizza guy, kids, and shopping sprees. Now I know I have just confused some people. Yes your balance should be zero every month. You are assigning money to your savings, bills, fun, and debt payoffs. Now do you see why I said zero balance. Account for every dollar.
When you name every dollar and designate it to spend, save, or pay debts you are in control. You are the master commanding your money to perform. This is your foundation to creating wealth. Your budget tells you what expenses to cut and if you need a serious intervention.
Principle Five Accountability Partner
You don’t succeed without a team. Couples your partner is your partner. If you are single find someone who will tell you the truth. Your partner will keep you on track and make sure you don’t lose control.
Naming every dollar is a simple process but it takes discipline, self master, and a plan. It is not a one time thing but something you will use for the rest of your life. Debt freedom and wealth are yours when you name every dollar and control your money.