As our family found itself, like many others, floundering in the current economy, we relied on 5 simple steps to help us be in command of our finances, rather than the other way around.
-Make a budget and stick to it. This seems like a simple enough statement but our see-and-buy mentality had stripped us of our self-discipline and prudence. In short, we were spending more than we were making. With strict guidelines in place, we found ourselves turning down items to purchase, even if they only put us a few dollars over our budget. We allocated a fixed amount of money for monthly bills, and then set rigid amounts for purchases like groceries, clothes, or entertainment. For example, through careful meal-planning and budgeting we were able to feed a family of 5 on roughly $80 a week. That may be more or less than is necessary for other families, but the important principle is sticking to whatever amount our family agrees upon.
-Include in your budget charitable donations. I can boldly state without reservation that including regular charitable donations in our budget actually improved our financial well-being and quality of life. There are several reasons behind this principle: first, when we give to others we recognize our own level of comfort and become more grateful for what we do have; second, it forces us to be more strict with our spending so we can include it in our budget; third, it is an important part of our family objective to help others, so in this way we can make specific, attainable goals and see the literal fulfillment of those goals. Call it Karma or whatever you will, but setting aside money each month for charitable donations has developed in us habits of giving and increased our quality of life.
-Ensure each family member is participating and encourage transparency in all financial dealings. It is difficult to stick to a budget if one or more of the family is not on board with the family budget. We have found that in order to maintain an honest budget, we must all be honest with one another regarding our spending habits. This can be a brutally painful process for some at first, but with consistency and openness between family members we have been able to stick to our family budget, making minor adjustments as necessary, and use one another as anchors of support. We have found when we are open and honest with each other in all things, it becomes easier to achieve our financial goals.
-Get out of debt: avoid credit cards and other lines of credit. We had been trained since we were teenagers to worship the almighty credit card, when, in fact, it was credit card debt that was drowning us. We set specific goals to pay off each card in as timely manner as possible. We also paid the maximum amount on car loans, home loans and medical bills until we could finally say that, excluding our home mortgage, we were completely debt free. These are line items that must be included in a monthly budget, but once each card is paid off, the funds allocated for that specific debt can be spread out elsewhere. If this sounds like a daunting task it may be helpful to consult a money manager recommended by a trusted friend or associate. Once these debts were paid we vowed not to accrue more debt through various lines of credit unless deemed absolutely essential.
-Save, save, save. Even if it is only $5 per week, every little bit helps. Setting aside some money each month, either for general reserves or for more specific items like kids college funds or future house down payment or retirement cruises, has also helped us established patterns that will increase our financial freedom now and in the future. That weekly contribution has grown in time. Whatever the money is set aside for, we have peace of mind knowing it is there, and that knowledge is worth its weight in gold.
Through careful planning, thoughtful allotment of our finances, and getting out of debt, we have freed ourselves financially and are in control of our own lives again.