Would you like to improve your financial health? If you are anything like the average American, you’ve got some debt. It might be a mortgage, student loans, credit card debt, or a car loan. In fact, the average household in 2017 was carrying $131,431 dollars of debt.
Sometimes, that debt can make your financial health feel out of control. You might feel an underlying sense of anxiety, or wake up in the middle of the night with the money sweats, worrying about a medical bill or your next credit card payment. You long for a time when you’ll feel financially stable.
The good news is that there are ways to face your financial health without becoming overcome with fear, anxiety, or anger. Here is a simple six-month plan to get you to a place of financial health and peace of mind.
Financial Health Steps
Decide to be a Victor: Day One
The first part of this six-month plan is to find ways to step out of the victim mindset. Take full responsibility for your financial health, whatever it may be, and decide that you are going to be a victor instead of a victim. Don’t put this off. Instead of “one day…” think in terms of “This is day one”.
Write It All Down
The next step is to write down your exact financial situation as it exists now. Do this within one week of starting your journey to financial health. Make a conscious decision that you’re ready to look at your financial health in full. Here are some items that you need to uncover.
- How much do I have in my bank checking and savings accounts?
- How much do I have in my retirement fund?
- What is the dollar amount of my investments, at this moment?
- What is the net worth of my assets (the car I own, boat, bike, vacation home)
- What is left to pay down on my student loans?
- What is my credit card balance?
- How much do I owe on my car?
- How much do I owe on the house?
This snapshot of your net worth will help you understand exactly where you stand. Use a printable worksheet to make sure you cover everything.
Know Your Ins and Outs
The freeze-frame snapshot of your money situation is important to have. Next, you are going to build on it. When nurses and doctors take care of patients in the hospital, they track “I’s and O’s”, or “Ins and Outs”. This is essentially what you have to do with your money. This will take you at least one month to accomplish. Here are the steps:
- Print out the last three months of your bank statements
- Track your expenses and income for one month
- Look at the data for this one month, and calculate your “I’s and O’s”
- Find your average “Ins and Outs” for the four months of data that you have
A powerful saying from recovery and treatment programs is “My best thinking got me here”. When you look at your financial health, recognize that you have been doing your best. Your snapshot and your I’s and O’s represent your skill level, as it exists today, for managing your finances.
This means that if you want financial stability, you have to introduce new ways of thinking. For example, if you notice that you need to increase your income and cut down on spending, you will need to uncover strategies, which you may not currently be aware of (or else you would already be doing them!) to do so.
Choose trustworthy resources and teachers. Here are some books and podcasts to check out, as well as helpful tools.
Books and Podcasts
These resources will help you get in touch with your personal money mindset, and give you practical strategies to change the way you think and act so that you can reach success.
- “Money: Master The Game” by Tony Robbins
- “Money: A Love Story” by Kate Northrup
- The “Good Financial Cents” podcast by Jeff Rose
These resources give you the ability to be smarter and wiser about your budgeting, spending, and safety.
- Mint.com is an online resource that can help you link all of your accounts so that you can see your financial snapshot in one place. It helps with budgeting, tracking finances, and making payments.
- YNAB stands for “you need a budget”, which you do! This resource makes budgeting fun.
- Lexontrack is a 24/7 identity theft monitoring service. This credit repair company can help you get the law on your side to fix credit disputes. It also includes tools to help you plan for your financial future.
- Annual Credit Report.com is the only authorized website for free credit reports. Once you submit your information, they will deliver a detailed report annually from three nationwide credit reporting agencies so that you are aware of your numbers. If you find yourself in need of a credit fix, this is a great place to start. Get informed!
Find the teachers, resources, and tools that work for you. Everyone is different and is in a unique situation. At the two month mark, you should identify the strategies you personally need to use and give them a try.
As you introduce new ways of thinking into your financial health, you will start to see changes. Clarity will also drive change. Incremental changes add up over time.
For example, if you find a way to lower your credit card interest payments so that you can pay them each month, and you additionally put $200 towards the balance each month, you will notice your consumer debt trending down.
Do some math to discover how long it will take you to pay off your balances, and put that date on your calendar! When you trend in the right direction, all you have to do is stick to the program that is working. Check-in after three months to ensure that the trend continues. If you find that you aren’t yet on track, make additional changes.
At the six month mark, give yourself some credit — no pun intended. You have worked hard to take control of your financial health. It is time to celebrate your progress.
Here’s a recap of your action steps:
- Day One: Change your mindset from “victim” to “victor”. Uncover your money snapshot
- Month One: Print out bank statements for the previous three months. Track Ins and Outs.
- Month Two: Based on the data you collected, make educated changes to your spending and saving habits. Use resources and tools to introduce new ways of thinking.
- Month Three: Check-in and look for trends. If you aren’t trending in the right direction, make course corrections. Mark key dates on the calendar.
- Months Four and Five: Monitor trends.
- Month Six: Give yourself credit for the changes you’ve made.
Please let me know if you have any questions on how to improve your financial health.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt-free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. He blogs at Debt Discipline.