Five Steps to Financial Stability

There are five steps you must perform that will help you pay off your debt and get you back on track to financial stability. The steps consist of: evaluating your current financial situation, defining what you want out
of a budget or your financial goals, developing a plan of action, implementing your plan, and reviewing, reevaluating, and revising your plan. I know this all sounds like it requires a lot of effort but financial stability is worth it. You are not alone in this, everyone experiences debt some point during their lives.

The first step is to evaluate your current financial situation. I recommend keeping track of where your money is being spent for a month. If you have a bank account through one of the larger banks, they have already done this for you. If not, you will need to categorize your expenses. Utilities, entertainment, auto/gas, education, groceries, and veterinary expenses are only a few categories that you can use. The type of categories will depend on your personal expenses. Microsoft Money and Quicken are two forms of software that help you keep track of your finances.

The second step is to define what exactly it is you want out of a budget. Goals can be placed into three categories: short term, medium term and long term. Short term goals are goals that you do not require longer than a year to pay off. Medium term goals are goals that require longer than a year but less than five years to pay off. Long term goals are goals that take longer than five years. Some short term goals include purchasing a new stereo system, an entertainment system, a small computer, etc. Purchasing a new refrigerator, stove, and vehicle are a few examples of medium term goals. Some long term goals include purchasing a home, boat, or tractor, investing in a 401K plan, and paying off an education loan.
The third, fourth and fifth steps will require tweaking throughout the rest of your life. The third step is to develop a plan of action. This plan will help you meet your goals if you stick to it. In order to prevent
yourself from straying, it is important to make the plan realistic to your income. The plan should also be flexible. Opening a money account will ensure that you have "extra" money hidden in savings for unexpected incidences that could appear at any given moment. The fourth step is to implement your plan. I would start one week before the end of the month. This will allow you to make your payments one week in advance so that you are guaranteed to never make a late payment. This also allows you plenty of time to correct payment problems before the bill's due date. The fifth step requires you to review, reevaluate, and revise your plan. This step is very important if you wish to remain financially stable. As your career advances, so will your income. If you get married or have children, your living arrangements will also grow which means your utility bills will increase. It is important to stay on top of your financial obligations.

One last note of advice, if you don't have the cash to buy something then don't buy it. Keep your credit card at home in a safe where you can't access it. If you really want to make sure you don't use your credit card then ask a friend or family member to choose the code on the safe and not tell you what it is until that card is paid off. If that is not motivation, I don't know what is! Happy financial planning!