Go from *totally lost* to *totally in control* with these four money basics.

The core message of this blog is to keep things simple and moving forward. (And have fun!)

It’s time we get back to the basics.

Here’s the same four steps we took when we first started paying attention to our money.

Follow these four simple steps and you’ll turn from totally lost to totally in control of your money!

1) Track your spending

When Carrie and I did our first monthly budget we weren’t totally lost, just… well, okay we were totally lost!

The problem was we did it backwards. We tried to budget first without knowing where our money was going.

We tried to set a budget and realized there was no way of knowing if it would work.

It wasn’t until we tracked what we had spent our money on the previous month that things started to make sense.

Once we saw where our money had gone, (it wasn’t pretty!) it was MUCH easier to create a budget for the upcoming month.

Track your spending first! <—- Use Tiller to help!

Tracking your money can be an eye opening experience if you’ve never done it.

It’s the first step and it sets the stage for the rest of your plan.

2) Set a budget

Winging it doesn’t work. (Just ask yourself.)

Even a budget that you kinda-sorta stick to is waaaaaaay better than none at all.

The good news is you don’t have to get it 100% right every time in order for a budget to work.

It’s not a pass/fail thing. It’s a sliding scale, it can always be better and it can always be worse. Just aim for “not bad” and go from there.

The goal is just to keep trying every month.

A monthly budget is key to the rest of your success! <—- Download your free monthly budget spreadsheet complete with a how-to video!

Okay, time to pull your plan together…

3) Pay off your debt faster

Got debt? Get rid of it!

I’ve heard lots of people say you should treat your debt like your house is on fire. If your house was on fire, would you look at it and say, “Oh, that’s gonna suck…” and then go out to eat while it burns? NO! You wouldn’t do ANYTHING else until the fire was out!

You’ve been paying and paying and paying…. Why isn’t your debt going away as fast as it should?

There’s a few reasons why…

  1. You are only paying the minimum: Paying the minimum DOES NOT WORK. You have to throw everything you’ve got at your debts for them to go away at any sort of acceptable rate.
  2. You aren’t organized: Do you have a list of each debt, the current amount owed, and your monthly payment? Can you tell me the exact month you will be debt free at your current payment rate? If you don’t have this info, it’s time to get organized. Good news… it’s easier than you think.
  3. You aren’t snowballin’: The best way to pay off multiple debts is by listing them from smallest balance to largest balance, paying the minimum on all debts except the smallest, and paying as much as you can on the smallest until it is gone. Then move on to the next debt.

Getting out of debt is arguable the best progress you can make for your money.

I know paying money on debt feels like you aren’t making progress, but that’s not true. Every time you make a payment you are actually moving in the right direction. It’s just a matter of how fast you want to move!

Use this spreadsheet to get organized and then read this book to crush your debts even faster.

4) Track (and grow) your net worth

Why bother with any of this if you aren’t interested in growing your net worth?

Growing your net worth is the prize for all your efforts!

Here’s how to calculate your net worth…

Assets – Debts = Net worth

(And yes, you can and should calculate your net worth even if it’s negative!)

Calculating your net worth is often extremely motivating. It pulls everything together nicely into one place.

Watching the number go up each month is encouraging, validating, and fun.

Again, it’s the prize for all the work you put in to tracking, budgeting, and paying down your debt.

Use this free spreadsheet to track and grow your net worth.

Stick to the basics and you’ll be fine!

Got any hot tips for sticking to the basics? Lay it on us.

How did it feel to go from totally lost to totally in control?

-Derek

2 Responses to "Go from *totally lost* to *totally in control* with these four money basics."

  1. Steven Goodwin   March 26, 2017 at 7:42 am

    We used this same process to get ourselves into control and it’s really an amazing feeling! Once we really got a feel for our finances, we were better able to manage and grow them. A budget is just a roadmap to where your money is going to go in the future.

    As far as getting rid of our $27,000 gorilla called student loans, it took us two years, but our consistent effort and tracking our debt free date and our balance left to go helped to motivate us tons!

    I wish I would have tracked my net worth while it was still negative, but I didn’t learn to track it until we were already positive. I find tracking my net worth on my site each month and holding myself accountable to my family’s financial decisions is one of the best ways for us to stay on the right track and to grow our money. Since starting to track our net worth, we’ve been able to grow it more than 500%, which still amazes me to this day!

    Reply
  2. Durga   March 27, 2017 at 1:46 am

    These four basics are base for having control over our finances at any stage of life. But implementing these four things in real scenario is the toughest thing.

    Reply

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