Step 1: Save
Maybe you’ve heard the phrase “pay yourself first?” That’s your new mantra. I don’t care how much debt you have, how bad you are at tracking your spending, or how little willpower you have. Take a few dollars, as much as you can but even just a few is ok, right after you get paid, and put it aside. In a jar, in an account, under your mattress, I don’t care where you put it just don’t touch it.
Step 2: Budget
Now that you’ve started an emergency fund, take care of your day-to-day budget. If you have debt, get that paid off and keep it paid off. Stick to the money you actually have. Figure out what you spend money on, write it down, and make a monthly plan. The most important part of this step, though, is to stick to it. If you spent too much money on gas this month and your car is on “E,” then it’s time to dust off that bike. Whatever you do, don’t touch that money you put aside at the beginning of the month.
Related: How to Create a Budget In 6 Steps
Step 3: Cut unnecessary spending
Now that you know how much you spend, it’s time to start cutting. Do you need to eat out for lunch, or can you make a PB&J at home? Think about if you cut out one lunch a week, $7-8, that’s $28-32 per month or $364-416 per year. Even small cuts add up, and that extra money can go to your savings or to paying down that pesky debt. Again, stick to it, no “special day lunches because you had a hard week and you deserve it.” You can celebrate later.
Step 4: Savings
Now that your spending is in order, and you have a small stack of money under your mattress (remember? Pay yourself first) you can get a real buffer built up. The general advice is to keep enough for three or four months of your standard spending in an easily accessible savings account in case of emergencies. So take that money you’ve been putting aside right after you get paid (you didn’t touch it did you?!) and put it in an account. Then leave it alone!
Step 5: Debt
As for your debt, pay it off as quickly as possible. This is not as easy as it sounds. It might be tempting to use that savings to pay off your debt, but for now, pay what you can. Make sure you leave something for yourself, or you’ll fall right back into old habits.
Step 6: Add income
If you have trouble cutting, or if you can’t find the extra money to save or pay off your debt, consider some work on the side. The internet provides a litany of opportunities to make a couple of extra bucks.
Whatever your situation, remember: pay yourself first. A little willpower will take you a long way to escaping the vicious circle. It’s not hopeless!
If you enjoyed this blog, take a look at some of our other related articles:
