How To Get From Financial Chaos To Financial Independence

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You want to be good with money. Right? I mean who doesn’t?

Maybe you don’t know where to start?

You’re a bit confused. Or super confused.

Maybe you’ve read Dave Ramsey stuff, random Pinterest articles, and maybe got some tips and tricks from family and friends? Sound about right?

You probably understand some of what you’ve read and been told, but you don’t know how it all fits together.

Payoff debt first right? Then invest.. or something? What accounts should you use? How much do you need for retirement?… Wait, what about the emergency fund? Can I buy a house? What about college funds for my kids? Or can I even afford kids at all?!

Super overwhelming, right?

I get it. I know. I was there (still there sometimes, finance stuff can be weird and confusing and everyone has a different opinion).

But that’s why I made this website – and this post!

I’m going to show you how you can get from financial chaos to financial security! (And a bit beyond that. How does financial independence sound?).

How To Get From Financial Chaos To Financial Security (And Beyond! Like Financial Independence!)

    • Why is this important?

This is important because you should know where your money is going, and how you can make it work for you. You should be scared to open up your banking app to check your balance (like I was), you shouldn’t cringe when opening bills (like I was), and you should feel confident when making decisions regarding your finances. You owe yourself this.

    • What makes me qualified to tell you what to do with your money?

I’m not a CPA, financial advisor, or a money coach.
But I went from never paying bills on time, not checking my bank balance (because I was terrified) to having a budget (that works for me!), a debt payoff plan, and a plan to become financially independent.

What is Financial Security and Financial Independence?

    • What is Financial Security?

To me, financial security is when you have enough money to cover emergencies and you have a plan for your money. This doesn’t necessarily mean you’ve paid off all of your debt, but to be financially secure, I think you should have your debt under control (have a debt payoff plan at least).

    • What is Financial Independence?

Financial independence is when you have enough assets to cover your expenses. Basically, your money will enable you to do the things you want to do, if that’s traveling, not working your current job, or maybe starting a business? Freedom.

Ready to learn how you can get to financial security and financial independence?

Start Getting Ready Mentally

This journey is going to be difficult. It’s hard going from not knowing where your money is going and a possible negative networth, to actually thriving financially.

You’re going to have to make some drastic changes. Cutting your spending, tracking your spending, and other not-incredibly-fun things.

You can do it, you just have to be ready!

Find Your “Why”

Okay so you’ve decided you want to make some changes financially – so you’re ready for the next step. To keep yourself going, you need to find something that will keep you motivated (your “why”).

It can be a feeling (like the feeling of freedom because you’ve paid off your debt!), or something more specific (like being able to do what you want with your time because you aren’t tied to job you hate – because your set financially!)

I got more into detail about finding your why in the post – how to stay motivated when paying off debt (find your “why”)

Get Your Family / Partner Involved

You’ve decided to make some changes, you have your why handy. Now it’s time to have a conversation with your partner and family (kids, dogs, etc).

You’re probably wondering why I said you should have your why handy before talking to your family. Okay, here’s why. Your family might be reluctant to make changes and may not see the importance, but if you do the pre-work, it can show that this is meaningful to you, and that you’re willing to go all-in! This will make it a lot easier to talk to your family.

I’ll write a post about this eventually. Basically, you want to sit with your family and explain what you want to do and why. Just be open and honest and don’t get defensive or frustrated. Also be prepared to answer any questions they may have.

Know Where You Stand

To get where you want to go, you first have to know where you are now. Do you know were you stand financially? Know how much you owe? The interest rates? Everything?

If the answer is no, now is the time to fix that!

What Accounts Do You Have (and where!)

The first thing you should do is figure out what accounts you have, and all the information associated with it. You can create a spreadsheet for this information, or write it down.

I’ll write a more in depth post on this soon, but this is the basic information you should have:

  • Bank Accounts – You should know what bank accounts you have, what bank they’re with, and what the balance is.
  • Credit Cards & Store Cards – What credit cards do you have? What is the current balance? And what is the interest rate? What are the due dates for the payments?
  • Loans – Do you have a mortgage, car loan, or student loans (or all of the above)? Who services your loans? What is the interest rate for each loan? When is each payment due? Are there any penalties for paying off the loans early (this is a biggie!).
  • Other Debts – Do you have any other debts (like do you owe a friend or family member some money)? How much do you owe? When do they expect to be paid?

What’s Your Credit Score?

Knowing what accounts you have is only part of knowing where you stand. You should also know what your credit score is.

It’s important to have a good credit score. You can get better rates on your mortgage, and/or car loans, you can get better deals on cell service, cable, and internet, and usually it can help you get better insurance premiums. Important stuff.

You can check your credit score for free using Credit Sesame.

Here are the credit score ranges (according to Experian):

  • 300-579 – Poor
  • 580-669 – Fair
  • 670-739 – Good
  • 740-799 – Very Good
  • 800-850 – Excellent

Don’t worry if you don’t have a good score (we’ll work on improving it later). It’s just important to know what your score is now.

If you want to learn more about credit scores (including how to build and repair credit), read¬†The Beginner’s Guide To Credit Scores.

Track Your Spending

Before you start trying to make a budget, you need to know how much you’re spending, and what you’re spending your money on.

I suggest tracking your spending for a month.

And don’t just use an automated app like Mint. You should do this yourself with either pen and paper, or using a note app or something. You need to be very accurate (down to the penny). This will make creating a budget much easier down the road.

Get A Mini Emergency Fund

You need an emergency fund. Things will come up that are out of your control, like emergency dental issues, car repairs, etc. And in those times you will need money (because you can’t really plan for emergencies – well not beyond saving an emergency fund). It’s important, okay?

People usually say you need anywhere from 3-6 months of expenses for your emergency fund. But that can be a lot to save at once (especially if you have debt to payoff).

So to start, you’re going to save up a mini-emergency fund. $1000. This should be enough for any minor emergencies, and will help create a tiny buffer in your bank account.

How to Raise Funds For the Emergency Fund

Getting to $1000 might sound a bit hard, but that’s okay, there are tons of ways you get money for your emergency fund.

  • You can sell things you don’t use online (think clothes, video games, etc).
  • You can pick up extra hours at your job
  • You can side hustle for extra money – check out my list of 100+ Ways To Make Extra Money

Start Your Budget

I could write 10+ posts on this, but I’ll give you the short version.

First, you need to figure out your fixed expenses, this is stuff like your rent/mortgage, your car payment, your debt payments. The things that are the same amount each month that you have to pay for (just the necessities).

You want to subtract your fixed expenses from your monthly takehome pay.

This is what is leftover for all of your unfixed expenses. This is stuff like food, netflix, clothes etc.

Your expenses shouldn’t be more than your takehome pay – if it is, then you need to start cutting back or you need to increase your income (or both).

Also it’s important to save on the big expenses in your life (house, car, kids, and education)

Congrats You’re On the Way to Financial Stability!

(part 2 coming soon).

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