How to Feel Like You Have Financial Security
Maybe you can relate to this feeling-you're making a nice salary on paper-one that sounds like a lot of money-yet you can't seem to make your dollars and cents stretch. You pay all of your bills, and each month you still don't have enough to cover your obligations. An unexpected life event happens, and you have no idea where you will get the money to take care of the problem. All too often we rely on credit cards and we hope that things will get better with the next raise, an inheritance, or a bonus.
I know I have felt this way. And it isn't the way it is supposed to be! In a quest to find financial peace and security, I have taken some steps that may help you to do the same. Now experiencing financial peace, I must say that there is no other way to live. Spend less than you make, and your life will always be more simple than if you do it the other way.
The first thing that I did was open all the old bills, find all my obligations, and make a list. I was somewhat appalled at the total of the monthly amounts we were paying-no wonder our life was so stressful. The other thing this did for me was show we that it wasn't impossible, and that once all listed, it wasn't the monster that I thought it would be.
Following the Dave Ramsey "Total Money Makeover" plan, I listed these debts from smallest to largest. Many only experts will tell you to attack those with the highest interest rates first. I fell in love with the plain talk of Mr. Ramsey when I heard him say "it isn't the interest rates that got me into this problem".
Armed with my list, I knew what my "debt service" (monthly minimum payments) was. Also imperative to financial peace is a budget. I wrote down the "net" amount of salary that would be coming into our household for the month, and I made quick work of listing everything I needed to spend that money on. For example, I included my minimum payments (including my mortgage, if you have rent, you would include that as a separate line item), groceries, utilities, entertainment, all the way down to newspaper, dog food and baseball expenses for the kiddo.
Another thing Dave Ramsey tells those of looking for financial peace to do is to build a mini-emergency fund. He suggests it be $1000, so that one never has to use a credit card again. I thought this amount seemed very low, but his rationale is that you don't want it too large...as if it's too large, you won't be "scared" enough to stay focused on paying down your debt quickly. We had an emergency fund in place, but decided not to reduce it to $1000. This was a personal decision, made by me and my husband. If it was up to me, I would reduce to to about $5000, but all decisions we made were joint, which has helped my marriage significantly.
For me, one of the scariest parts was swearing off the credit cards. Too many times I bought clothing or other "fun" items with a credit card without regard for where the money was going to come from. I called all the card companies except one and turned all the cards off from further charging. It's really important that you add no more debt--that's why the emergency fund is important. If I don't have an item in the budget, I either figure out how to get more income in to pay for it, I wait until the next month to budget for it, or most often--the urge to buy it goes away.
And-the fun really began as we found, that with cutting more and bringing in more income, we could begin paying off a lot of our debts. We paid all our monthly expenses, our minimum payments, and have cash left. We applied this cash to the smallest debt first, and made that go away. We never decreased the amount of money we used for minimum payments-as required payments went away, we applied them to the next smallest debt! This is often referred to as "rolling your debt snowball"-another term I learned from Dave Ramsey-and in our case, we quickly had a boulder!
In your quest towards gaining control of your finances, begin slowly. List all the money you owe, make a budget which includes your minimum payments, and begin growing your debt snowball.