How to Take Control of Your Finances: A 30 Day Step-by-Step Guide to Master Your Personal Finances

by RedBeard

Over the last couple of weeks, I’ve researched and written a few posts on personal finances. The idea is simple: assess, set goals, make a plan, and to take action. Now I realise that, can be difficult to put the steps in order.

Read on to see how and when to reduce debt, save, and increase your income. Its not easy, but following the steps will change your life for the better.

Overview

The steps below are going to improve your personal finances across several areas. Each area will be will visited several times as your financial situation improves, and at each visit the actions will balance other financial commitments, such as debts, and your income. Let’s look at the areas:

  • Firstly, the fundamentals are established – know the current situation and make some goals
  • Second, building security.
  • Third, getting rid of dirty disgusting debt and committing to not taking on more.
  • Fourth, increasing your income. Even if only a slight increase, when it comes in conjunction with the other steps, the improvement to your financial situation will be significant.
  • the final area will be improving managing money, and spending.

1. Make an Assessment 

Honestly review your current financial situation. Do you live within your financial means? How much are you spending compared to what you earn. How much debt do you carry?

Do you any security? Do you have an emergency fund? Can you support yourself for a period of 6 months? Do you have the necessary insurance to support your loved ones should you die suddenly?

Do you have a financial plan for optimising your finances including a saving plan, and becoming debt free? Are taking actions to move toward financial abundance?

Where are you in the stages of financial freedom?


2 Set Your Financial Goals

It is well documented that people who have clear written goals will are more successful and more self-confident. People with goals are more likely to get what they want. You should take some time to clarify what it is you want to achieve and write SMART goals as one of the first steps toward taking control of your finances.

The goals should include debt reduction (assuming you have debt), growing your income, improving security through saving, and investing. Consider setting the goals with your partner. But also include other goals on health, and personal develop and time with friends and family.

Review the goals daily and really know the benefits that you will get from achieving. Chek out our full article on setting goals.


3. Get to know your Debt 

In preparation for paying down the debt, you need to know exactly how much debt you have, how much are currently paying, what is the minimum payment and how much is left outstanding.

I suggest that you use a spreadsheet, but a piece of paper will do.

  • List your each of your debts. Order them with the smallest outstanding balance at the top and the largest balance at the bottom of the list. The interest rate is not considered.
  • For each one, write the current payment and the smallest allowed payment.
  • If three is a difference between the minimum repayment and the current amount that you pay, write that down too.

4. Make a Plan

Goals are useless without a plan to achieve them. Here’s an overview of what you need to do. Be sure to read the full detailed article on how to develop you plan. Use a planner to help you. This is the one that I use.

  • First, break the goal down into chunks or sections. Outline the actions the need to be done in each section, and which activities need to be done first or
  • Secondly, your plan must include a list of the challenges & obstacles that you need overcome. Following that, list some the ways and actions that you can do to overcome them.
  • Ask yourself, “What are the skills that you need to learn and develop”? Who are the people who can help you? Do you know them or how can you learn from them?
  • Finally, begin to map a high-level timeline when you need to do some task. Break it down on a monthly and weekly and daily basis.

5. Save an Emergency Fund 

Have you ever broken a tooth? I mean, have you ever really smashed one? It’s not nice. It hurts, a lot. That’s why you need an emergency fund.  

You Set aside money to cover one the unexpected events that what will crop up.  And to be clear, an emergency is not a new shirt or dress for a party. Its paying for a medical need, repairing or replacing the oven so you can put food on the table., repairing the roof or windows….  

How Much to Save?

The big questions is how much to put away. Well, that depends on what emergency that you are planning for, and the health of your overall finances. Research from JPMorgan Chase suggests that every family should have $2000 to $5000 in the fund.

What’s more Important, Debt or Emergency Fund?

The truth is that they are both important. If you have just a small gap between income and expenses including debt repayments, then dealing with an emergency is very difficult. But at the same time, the debt repayments are keeping your poor.
Several studies have concluded that having cash on hand for an emergency can significantly reduce hardship in the of an unplanned event and having that cash is better than paying down debt.

I recommend that if you are struggling with debt, then first save $1000 to $2000 dollars while making the minimum payment on debts. Once you have that in the bank, focus on paying down the debt.  To get your fund started, read our full article on Emergency Fund

Once the debt it gone, then you can increase the amount you put into the fund. The longer-term goal should be to have 6 months living expenses.  

Reading our full articles on Emergency Fund and the Stages of Finance to help you decide what is most appropriate for you.  


6. Paydown Debt 

On day 3, you made a list of all the debts that you have. Now that you have saved your emergency fund, it is time to get start aggressively getting rid of each one.

  • Continue to pay all of debts at the minimum amount possible – except the debt with the smallest balance.
  • Pay as much as possible on your smallest debt until it is paid in full. If you can take money from the other debts to repay the smallest, do so.
  • 5: Repeat until each debt is paid in full

Read our full article on getting rid of debt.


7. Reduce your Expenses 

I review and reduce my expenses several times a year. I know that expenses just creep up and I also know that I can only generate wealth when I have money; this happens when my income exceeds your spending. I also keep a detailed budget spreadsheet that lists all monthly income and expenses.
My bank helps me to easily track spending and I review the household spending habits and not just our standard expenses. I need to know where your money goes so that I can make changes. You Can download a free tracker from Consumer Financial Protection Bureau.
From there we cut the “luxuries” and put the toward long term savings or use it buy something specific (last year it was new TV).

Here is a list of ways to reduce your expenses:

  1. Expensive TV Subscriptions. Dump the add on packages. If possible, switch to the most basic package. Try to negotiate the cost.
  2. Cancel unused memberships & subscriptions- gym, yoga, book club, wine club, magazines, newspapers, YouTube, Netflix, spotify…. whatever you don’t use get rid of it. Consider ditching some of the ones you do use.
  3. Switch banks to once with lover costs
  4. Switch Utilities (see below)
  5. Bring lunch to work, don’t buy it.

8. Start your Side Hustle 

To grow wealth, you need to have surplus of money at the end of the month. The greater the surplus, the faster you can move up the Stages of Financial Freedom and with it the more opportunities you will have to grow your wealth and to secure your financial future. Having a second or third source of income is an obvious way to get to the place.

How to Get Started with a Side Hustle or Second Job

If the idea of creating a second income stream seem overwhelming or if you are not sure where to begin, then read our post 7 Fundamental for a Successful Side Hustle, get some ides from 9 Simple Side Jobs Than Anyone Can do, or have a look at all our articles related to side hustles and second jobs.


9. Switch Utilities 

Why should I change suppliers?

Natual Gas, Electricity, Phone, Land Line, Internet are all commodity products that have lots of suppliers. Switching is easy and can save money you money.

About two years ago, I changed TV and Broadband and I saved $109.05 per month. I didn’t have any “add-on” premium channels with either provider. There was a difference in the service. For example, I dropped from about 500 channels to around 350 channels and now have less online storage. I still have all the channels that I usually watch and rarely record anything…

Energy Utilities

In the UK and Ireland, the markets are deregulated. Therefore, switching is easy (see below). In the US however, not all states are deregulated. Depending where you live, you may have limited options. You can see a full list of deregulated states here.

How do I Switch?

Switching utility providers is easy. There are dozens of price comparison sites. You give your details, usually postcode and the site will tell you who is offering the best prices in the area. On many of the websites, you switch supplier through the price comparison website, making it even easier for you to switch.

The Office of Gas and Electricity Markets, (ofgem) has a free guide on How to switch energy supplier and shop for a better deal for UK residents. The guide lists everything someone the UK needs to change. If you live in Ireland you want to know how to switch utilities, The Commission for Regulation of Utilities (CRU) also has a guide, How to Switch – Step by Step.

Price Comparison Websites Accreditation:

In the UK and Ireland, some price comparison sites are accredited by the regulatory authority. That means that you can trust the price comparison websites to provide clear, independent and accurate information.
I would advise you to use an accredited price comparison website to help you find the best offer available to you.

Price Comparison Websites
IrelandUnited KingdomUSA
Bonkers.ieEnergy Helpline For Illinois
switcher.ieEnergylinx For New York
powertoswitch.ieThe Energy Shop For Pennsylvania
Money Supermarket Other States
My Utility Genius
Runpath
Simply Switch
Switch Gas and Electric
Quotezone 
Unravel It 
Uswitch
UK & Ireland Sites are Accredited by National Regulator. Information is Correct as of Aug 2020

What to Watch for When Switching

Contract Duration
When you switch there may be a minimum length of time that you must commit to with the new service provider.

–Early Termination Fee
Check what penalties my apply if you want to terminate the contract early Ensure that this is to your needs and the

Automatic Renewal
In the US, some providers may automatically renew your contract fora another 12 months if you don’t let them know that will switch when the current contract expires.

Short Introductory Rates
Some companies try to entice you with a special rate for the first 12 months, then they stick you with the full rate the is not so cheap. Be sure to review the full cost for the full length of the contract.

–Can you Switch if Behind on Your Bills

The good news is that it is possible to switch between utilities providers if you are behind on your bills. But is depends on what utilities you are changing, the amount and/or time that you’ve been behind. It also depends on where you live.

  • In Ireland you can switch is the debt is below €225.
  • In the UK, you can switch if you are less then 28 days behind.
  • In the US, it depends on your provider and where you live. No simple answer.

10. Learn

According to Inc.com, Warren Buffett says the key to being successful is to go to bed smarter than when you woke up. This very true. Bill Gates is not just one of the world’s richest men, he is a prolific reader. In fact, Gates considers reading to be essential to success.

Reading is low cost way to learn from the experience of others across multiple topics including personal finance and investing. It can help you to broaden your own skill set, but to also challenge the way you think.

As a bonus, studies show intellectual stimulation in the form of reading, solving crossword puzzles help to prevent cognitive decline.

If you are interested in what bill gates reads, you can view is recommendations here. You can see some of the books that I suggest here, and the list of books that Buffett has recommended in his annual letters.

11. Revisit your Budget, and Debt Reduction 


12. Increase the Emergency Fund to 6 Weeks of Income

Over the last 10 days you have successfully taken actions. You have now started an emergency fund of $1000 to $2000. You have reduced expenses, increased your income, and have eliminated debt. It is time to focus back on the emergency fund and grow it to the equivalent of 6 to 7 weeks of income.

Where do you get the money? Well, that easy. You have extra cash because you reduced have reduced expensed, cleared debt, and started a side hustle

Ok, let’s get serious. Cleary it’s not possible do all that in 11 days. But the purpose of this article to get your finances into shape.

Over the coming weeks, you should reduce expenses and increase your income with a second job or starting a side hustle. Yes, it’s hard. I know. I have done it. But stay focused on the end goal. Once the debt is manged, grow that rainy-day fund to 6 to 8 weeks.


13. Automate Your Finances

Using standing order and standing transfer orders are a simple way to take the thinking and psychological pain out of saving money.
I use standing transfer order each month when I get paid. My bank automatically transfer money into different bank accounts. This helps me to manage our budget and ensure that we always put money into our saving.
You can do the same. Arrange for money to be automatically transferred to a savings account either directly from your pay-check (by your employer) or by your financial institution once your pay-check is deposited into your account. There is no decision or remembering to be made. The saving just happens.


14. Right-Size Your Insurance

I put insurance into the same bucket as death and taxes. Unfortunately, you can’t avoid it. I hate to pay the premium, but I know that if the comes and I need it, then I will be happy that I purchased it.

There are a few things that we can do to ensure that we are not overpaying.

Evaluate the Excess

I was able to find research into the topic of “optimal deductible” (or excess) dating back to 1966. So, for over 50 years people have asked “what is the right deductible to have”? And people are still asking the same question in 2020 (see here). In fact, there is even a journal dedicated to the research of insurance risk.
(CAUTION: there is a risk of instant boredom if you read the Journal of Risk and Insurance)

The research shows that the premium is lower if you increase the deductible. That cannot be disputed.
However, the research also suggests that consumers overall, pays more when they choose a higher deductible, but individuals may pay less.

Let me explain that. If you group every insured person together and add up the up the costs they paid following an accident and compare that to the reduction in premium, all consumers as a whole probably paid more in total costs. But if you randomly select a person who did not have an accident, that person most likely paid less than choosing a policy with a higher deductible and therefore a premium.

Have the cover that you need

Years ago, I asked a surveyor to inspect my first investment property. While he looked around (and found a lengthy list of things to fix), we chatted and about this and that, and the housing market with its almost unstoppable rising prices. As part of that, we discussed the cost property compared to build cost. I learned a valuable lesson.

Even though you might pay 200k for a house, the actual cost to build is much lower. So, there is no point in insuring the property for much more than the build cost, because if the property is significantly damaged, the insurer will only pay the maximum cost to rebuild it. The same is true for cars. They will only pay the value of the vehicle at the time it stolen or written off.

It’s a simple point. Only buy the insurance that you need.

Shop Around

It can be a pain to shop around for insurance. We become complacent and lazy and the insurance companies know that. Ask yourself, when was the last time your annual renewal notice had a lower premium than the previous year? Many companies will slowly edge up your insurance just a few dollars knowing that you are likely to brush it off.

In reality however, there is a lot of variability between insurance companies for the similar policies. Use price multiple comparison websites to compare quotes quickly and easily. Call you insurer and tell them that you want a reduction, you’d be surprised how often it works.

Aovid the Extra Bells and Whistles

Many insurers offer extra services to make their policy look like it better value. Often you see roadside assistance service bundled with car insurance, or lots of travel miles, or $1000 discounts on related services. Most of the time, polices with this are cheaper.


15 Do it Now… 

Day 15 – halfway through. If you have taken the action on the steps that are appropriate to you, then Bravo. But, if you’ve lost some motivation along the way or are saying “I’ll do it tomorrow”, then get back it. Decide to act now. Nothing will change unless you take the necessary steps to make it happen.


16. Sell old Stuff – use it to pay off  

Use the cash that you get from selling old stuff to either build up your emergency fund or if you have reached the 1k to 2k target use the money to paydown debt.  

My wife manages to sell old stuff every month. Usually she raises from $20 to $80. Our situation (we have reached our both our emergency fund target (6 months of bills) and have no consumer debt) allows up to use the money for guilt free spending. Occasionally, it used to pay for an expense that was not budgeted.  


17. Understand the Mind-Control to Make You Spend More 

It will come as no surprise to learn that Supermarkets and other stores are designed so the impulsive purchases of the average customer are maximized. Researchers are now using artificial intelligence to ensure shops can squeeze every penny out of you.

Have you ever noticed when you go to big supermarket, the fresh products, are at the front of the shop? The smell of the fresh baked bread comes soon after…but other daily essentials are at the back of the shop. This is not an accident.

The Store wants to put you in a relaxed state; The fresh products are at the font to make you feel good that you have made healthy choices.

Tactics Overview

  • The layout is designed to make you spend more time in the shop, and therefore buy more (from research above)
  • They Rearrange – so you have to keep looking for things, longer in the shop decision fatigue (from research above)
  • The most expensive items are at eye level – We read left to right, and shop left to right. Supermarket often put cheaper items above and below
  • Free samples – more likely
  • Bigger Shopping Carts – They are getting bigger size the 70s, and we buy more as a result. In an experiment, the shopping trolly size was doubled, and the shoppers spent 40% more.
  • Checkout loaded with goodies – By the time we get to the check out, we are tired and have decision fatigue. We buy junk.

How to combat it

  • Be Aware of the Taticts above
  • Use a List – and stick to it.
  • Never shop hungry – You will spend and buy more junk
  • Shop when store is very empty or very full – Research shows that shoppers spend less when store is almost empty or almost full
  • Use Ear Phones & Listen to Music. – Its sounds like junk science, but research shows that the sneaky shops are using music to make you spend more. Especially when sotre is very empty or very full.
  • Use cash – bring enough cash just for what you need. That way you cant over spend.

18. Control Your Emotions 

I admit that I have lost numerous battles with will-power and impulse spending; sometimes insignificant things – chocolate, clothes, or a book. Sometimes not so insignificant – a $2,000 camera 🙁

The occasional impulse purchase will not have a significant impact the budget; However, when the buying becomes a habit or is used as an emotional crutch, the consequences can have negative psychological and financial implications.

Why Do We Impulse Buy

I impulse buy when I am stressed. My wife does it when she is feeling a bit sad. This is supported by research from Psychology today. In fact, different people impulse buy across the full spectrum of emotions. We do in the hope that it will change our emotional state (anxiety, stress, sadness) or that it will continue our positive happy emotions.

How do You Control Impulse Buying

  • Only pay Cash – Before you say it – I know, cards are so convenient (and you get the miles). Not only are people are willing to spend more when they use a credit card than when using cash, they are also willing to pay more for an item or service.
  • Sleep more – What has that go to do with anything? Did you ever overreact to something because you were tired? Lack of sleep has been shown to reduce your ability to control your impulses. Sleep deprivation will also increase anxiety, make you more prone to stress, and make you more like to feel depressed. There are all documented triggers for impulse buying.
  • Turn off App notifications & unsubscribe from emails (except from this website, obviously) – You only have a limited amount of self-control in a day. The constant bombardment from TV, email, apps, in-store tricks will leave you depleted. If you use it all, you will crack somewhere. Either buying or eating, or something.
  • Have a Plan- Know why you are going to the shop. Use a list. Don’t deviate from the plan.
  • Allow yourself to Spend – Try to build into your budget a small amount so that you can shop guilt free. Depending on your circumstances that maybe $5 or $50. Once you have spent it, remind yourself of the finance goals that you have set, remember why you set the goals.
  • Learn your Triggers – I know that I am more likely to make significant impulse purchases if I am stressed or have a big deadline approaching. The shopping is distraction from whatever is stressing me. Now that I know, I have been able to stop myself from impulse buying

19. Revisit your Budget

20. Learn Some More 

I would wager that you have not heard of Victor Buso. He is a self-taught astronomer who discover and captured something that even NASA couldn’t manage to do – the birth of a super nova.

Steven Kiel is the president and chief investment officer at Arquitos Capital. He is a self-taught hedge fund manager who has returned over 16% annually since 2012.

These two gentlemen are examples of what you can do if you take the time to learn, practice and execute. Read or take courses – take a little time to know more each day. According to the Omaha World Herald, Buffett told a group of MBA students, “That’s how knowledge works. It builds up, like compound interest”.


21. Grow Your Emergency Fund to 6 Months of Income

At this stage of the process, you should have reduced a lot of your expenses, changed your spending habits, and increased your income. All that nasty consumer debt is gone. It’s time to get on a solid financial footing. Use the additional monthly savings from elimination of debt to save the equivalent of 6 months of income. This may take some time to complete, but once it’s done you have significant protection against life’s bigger surprises, such as job loss, or extended illness.

From my personal experience, having this cash in the bank lifts a lot of weight.

22. Start Investing 

Investing is not only for the rich. The development of ETF investing and the easy accessibility to training platforms with extremely low capital requirements has made investing available to everyone. 

Successful investing is a wonderful way to generate compound returns on your capital. 

How to get Started

One of the easiest was to get started investing into stock is a semi-passive strategy buying ETF from Vanguard. Vanguard has a vast selection of low-cost funds that are diversified. You can select US, international and sector-based funds. The website contains a lot of explanatory information.

What Broker Should I Use?

Personally, I take more active approach to my investing. I have used the same broker, interactive brokers, for well over a decade now. If you want to diversify out of just stocks, they offer a vast selection of products Additionally, there are recorded training webinars for you to watch. If you are considering trading options, my preferred broker us used TastyWorks. I have used them for several years.
You can also trade options with interactive brokers. I simply prefer the TastyWorks software – it’s easier to use for options. T, typically, the fees are lower too. 

What do I need to Know

Regardless of which strategy or broker taht you use. Plese do your research. Don’t just jump in blindly. Learn the fundamentals and understand the risks. Make sure the strategy is the right one for you. There are lots of break investing books to help you get started.


23. Review Your Retirement Plan 

What is a Pension

A pension is just a type of savings plan to help you save money after your typical working career ends. In most countries, there is favourable tax treatment compared to other forms of savings.

Here are some helpful links if you want more information about pension in USA, UK, and Ireland.


24. Consider Life Insurance 

If you have dependants, you should consider a life insurance policy. Having a life insurance policy can bring peace of mind know that in the event of your death, a lump sum amount is paid to a designated beneficiary.

There are two main types of life insurance policies:

  • Whole (or universal) life insurance policies will cover you for your entire life, providing that you pay the premium, the policy is in effect.
  • Term life insurance policies are in effect for a certain defined period or term. Again, as long you pay the premiums, the insurance company will pay a benefit if you die during the term. If you live past the time that the policy is in effect, the insurance company won’t pay a benefit. You can take another policy if it is appropriate to do so or give you a refund. 

Whole life insurance is much more expensive. that is because you will die. The insurer knows 100% that they will have to pay-out.


25. Make a Will

People who want to become financially free, usually don’t include death as way to get there. However, you must also consider family as part of your planning. Having a properly formatted legal will is going to save your loved ones’ time, money, and reduce their stress.


26. Paying Less Tax Does not Equal More Money 

I recently had an interesting meeting with an advisor from a bank (we are looking to buy a property). During the meeting, the “advisor” described options on repayments and a flexible service that can be used to offset the debt against wealth tax. Initially, I thought this was a super idea. Who doesn’t want to pay less tax? However, after just a couple of questions and calculations, it was clear that the tax would be would lower than the loan interest and fees.

This principle applies to many topics. Be prepared to question all of the advice that you are given; be sure that what you get is the actually the best outcome for you.


27. Review Your Budget

28. Review Your Progress 

After all of the activities that have been done, its tome to reassess your financial situation. As yourself the same questions we did in step 1. Compare your answers now to then?

Honestly review your current financial situation. Do you live within your financial means? How much are you spending compared to what you earn. How much debt do you carry?

Do you any security? Do you have an emergency fund? Can you support yourself for a period of 6 months? Do you have the necessary insurance to support your loved ones should you die suddenly?

Do you have a financial plan for optimising your finances including a saving plan, and becoming debt free? Are taking actions to move toward financial abundance?

Where are you in the stages of financial freedom?

29. Revisit steps 1-29 again 

Taking control of your personal requires effort. It is a continuous process. I suggest that you set a date in your calendar 3 months from today to go through it again to review all 

30. Enjoy

If you have followed then steps as outlined, then you are debt free and your income is more than your expenses. While still being diligent, its time to enjoy some of what you have accomplished.

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