The best part about Empower is answering real questions - this question was more of a comment - “My finances are a mess, what do I start with"? There are a ton of financial plans and programs that claim to help you get your finances in order - well - here's mine:
Step 1 - Taking a deep breath - both physically and emotionally. Take a moment to recognize that whatever state your finances are in, they didn’t just appear that way. It took time to get to this place, and it takes time to figure a way out. Forgiving yourself and giving yourself time to do better is kind of the first step.
Step 2 - We spend the first webinar reviewing the inventory, but even if you’re not in the webinar, you can inventory your own finance. Ask yourself (and write it down):
What do you make? (Pre-tax and post-tax income, identifying the amount that you’re saving for retirement, health care, etc.)
What do you spend? (In depth, monthly, with dollar amounts)
What do you owe? (include interest rates and current balances in your list.
Step 3 is to set your priorities. Here are some things to think about:
If you had a financial emergency that required more than your current bank balances, how would you handle it? Would it cause you to go into credit card or other debt? Do you currently have a lot of debt? If so, then, maybe an emergency fund is your first financial priority.
What is your next major expenditure? And before you tell me that you want to buy a home, tell me whether you’ve got a plan for retirement or whether your child has plans for college? How is your transportation situation - will your car carry you through the next 5-7 years? (It would take 3-6 years to recoup the costs of buying a home AND getting used to all of the hidden homeownership bills, so you wouldn’t want to put a car payment on top of that). Your next major expenditure should represent a list of future priorities in chronological order and your plans should be working towards those priorities. So, just because you want to buy a home, doesn’t mean that’s the financial goal that you should be focused on. And just because you want to fund your child's education doesn't mean that should be your financial priority. (See the post on emotional financial decision making).
And finally, what’s your plan? Once you decide what your priorities are (home, car, debt repayment, college, retirement, investment property, travel, etc.) and where they rank, you can develop your own plan. And your plan should include dollar amounts (you already did an inventory, you have the numbers) and dates. Some folks call this a budget - I do not. “Budget” gives me the same feeling that the word “diet” does. Like I have to limit myself and I’ll only do it for a certain amount of time, until I get to my weight loss goal. But a plan is something I choose to do, indefinitely, so that I can achieve my priorities. I can't tell you what your priorities should be. And no one else should either.
There are financial plans that can give you guide rails and help discipline you - those are good if they help you achieve your priorities. But priorities are very specific to your conditions, your situation and your level of discipline. And if you’re not very careful, you’ll find yourself feeling some kind of way for not sticking to someone else’s priorities for your life. Maybe you need a really big emergency fund, maybe you don’t. Maybe you should start by paying off all of your debt, maybe you shouldn’t. Maybe you should be focused on stacking coins for an investment property, maybe not. One size does NOT fit all - but start somewhere and start now. Take inventory, set priorities and make your plan. You owe THAT to yourself.
We'd love for you to be a part of the Empower community! Join our Facebook group for free personal finance tips or check out the Face Your Finances webinars for a little more guidance. We're enrolling right now! If you're interested, sign up at finances.empowermentsource.org or click the link in bio. See you soon!