Gaining control of your finances!!

Dear Readers,

This month I decided to create a post about a topic that many of us struggle with, or have difficulty on some level...finances.  I wanted to share with you what I've identified as eight steps to take in the area of finances that will give you power, and help you to shift your perspective about where you are:

(1) Interview your parents and older siblings about the historical conversations in your family regarding finances.  We've all grown up with certain conversations about money that have been passed down from those who raised us.  Whether the conversation in your household  was "we can't afford it" or "you can have anything you want," the point is that the conversations were inherited, and not created by you.  Learning what those conversations were in your household, and taking a look at what you say to yourself now about money is a very useful exercise.  You will be able to determine whether you are continuing those conversations without even realizing it, or you may determine that you are telling yourself something different in an effort not to continue whatever those historical conversations were.  For example, a person who grew up in a conversation of scarcity may have become a wreck-less spender as an adult.  In their mind they may be making up for the things they couldn't have as a child.

(2) Calculate your lifetime earnings.  Yes...your LIFETIME earnings.  This is a very empowering exercise.  It provides you with the opportunity to see your earning power with clarity.  When I calculated mine, it was over $1 million!  I felt very powerful when I saw that over the span of my life, I was able to generate that kind of income.  In this exercise, you want to be sure to count EVERYTHING you've ever inherited, worked for, been given, etc.  A good place to start is to look at your most recent Social Security Statement.  It has your annual earnings from the very first job you ever had on record.  If you could remember, also count the paper route or money your earned babysitting before  you began officially working.  If you are self employed and don't pay yourself a salary, use the Social Security Statement for the last year you worked and then use your corporate taxes for all the years you've been in business (or your personal taxes if you're an LLC).

(3) Know what you have!  I've met so many people who have pension plans from old employers, and other retirement accounts such as 401K's and/or 403B's and they have no idea how much money they have in these accounts.  I encourage you to look up all these accounts, order statements, etc. and add up all your assets.  That would include any money you have in these various accounts, as well as your personal savings, bonds, CD's and any other assets.  Your assets could also include antiques and collectibles....art...jewelry, etc.


(4) Know how much you owe!  Sometimes we take on that we really don't want to know how much debt we have.  Maybe what's behind this thinking is that if we don't acknowledge it, we won't have to deal with it.  There's a lot of power in knowing exactly who and what you owe, even if you can't pay it all right now.  Pull out all those bills...the credit card statements, the collection notices, any bills that you are receiving in the mail...even the ones you never open.  One of the things that we do with our clients who we pay bills for and coach around financial empowerment, is create an Excel spreadsheet of all their debts, and keep the actual paper statements in a matching binder.  Once you've identified all your debts, you can create a place to start from in repaying what you owe.  About 15 years ago, at the age of 30, I paid off $25,000 in debt little by little.  What kept me from paying it for many years was the notion that it was so monumental that I would never be able to pay it off unless I borrowed more money to do it.  One day I had a revelation - I realized that if I created a plan to repay it all, each month, I could proudly acknowledge that I took action toward my goal of being debt free.  Once I began operating from this place, before I knew it, I had paid those debts down to about $6,000.  About six months after that I was able to increase the amount of my payments, and the last few thousand dollars go paid off in a much shorter time-frame.  I had done it!!

(5) Determine your net worth.  Now that you know exactly what you have, and exactly what you owe, calculate your net worth.  This is a very simple exercise where you list out your assets, and then list out your liabilities.  Your net worth is your assets minus your liabilities.  And don't be alarmed if your net worth is a negative number.  It doesn't mean it has to stay that way.  The first step in changing that number from a negative to a positive is acknowledging that for right now, its a negative number.

(6) Create a budget.  This is another service that we provide to our clients; creating a budget, and working with them to stick to it.  It takes a little discipline, but its not difficult to do.  One of the most important things about doing this is that you are able to recognize if your bills and expenses are more than your income.  In knowing this, you will have the power to eliminate the deficit by either cutting back and decreasing your expenses, or increasing your income.

(7) Pay attention to your money.  Our company uses a free online tool known as Mint.  Go to mint.com and check it out.  You set up all your bank accounts, credit cards and assets and it tracks your debit and credit card transactions.  By doing this you are able to track your spending, identify trends, and see where you are being smart and where you need to cut back.  You can even input the budget that you created in step 6 above, and Mint will send you text alerts when you go over your budget for any of your monthly expenses.

(8) Create a plan for paying down your debt.  This is another area that we work closely with our clients on.  Depending on how much debt you have, we suggest different strategies for getting the debts paid.  You may have to start off small, and you can increase your payments as you increase your earnings/income.  It is wise to work on paying off your debts with the highest interest rates first.  We also suggest getting all three of your credit reports and ensuring that all the information contained in them is correct.  Consider the items on your credit report as you decide who and what you are going to pay off first, even the creditors that may have sent you to collection agencies, but are not charging you interest.  Also, be sure to create a reasonable plan for repayment, ensuring that your goals are attainable.

I hope that these steps I've shared make a difference for you, and help you to restore your power around finances!