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How do you start fixing your financial problems?

If you’re on this site, you’re at least going the right direction. If you’ve gone to the library to check out some books, if you’re searching through some weblogs, if you’re talking to your best friends about money instead of your high heels, you’re definitely on the right track. There are a million and one “first steps” suggested by twice as many people. I’ve looked in three places: my history, a book called Stop Fighting About Money and Start Making it Work for You from the local library, and The Simple Dollar online.

This is my top 8 list that I have complied over the past ten months as I approached my own financial freedom — the eight things that have make the biggest difference in my life, and therefore, the first eight things I’ll suggest to anyone looking.

1. Get a credit report from all 3 agencies. Fix anything fishy or incorrect. Write all your collections information on separate pages for later use. Remove yourself from pre-approval lists and stop applying for cards/house/credit. The more people who look at your credit, the worse it looks to creditors. See what your credit card company is reporting to the credit bureau. See what they value and what makes a difference.

2. Know your expenses budget. Sort by monthly expenses and yearly expenses. (Insurances sometimes are yearly. AAA membership, warehouse club memberships, union dues, even your holiday and anniversary budget) Then sort your credit cards and bank statements. How does this compare to your income?

3. Call your utilities and set up a payment plan for the next six months. The goal is stability to your budget, so things like water and electricity or gas that change with the seasons can benefit from a projection payment plan. Utilities are one place that can work with you on payment without interest. How much can you equalize expenses each month?

4. Buy a grocery shopping gift card, or a pre-paid credit card. This is a challenge to do smart shopping, get your nickel discounts for bringing your own bags, clip your coupons, and practice hundreds of other grocery tips. Give yourself a budget for the month. Come in 5% under. See how low you can go.

5. Take a good hard look at your yearly expenses in the pile made by step 2. Get your insurance re-evaluated to make sure you are getting the right rate. Did you quit smoking and forget to tell your health or life insurance? How long has it been since your last ticket? Did your insurance company revise its policy, making it possible for you to get comparable coverage for less? When was the last time you shopped for insurance?

This one can be a fun break: Can you do holidays cheaper this year? Start planning now! The are ideas all over the web, but I suggest browsing the SavingAdvice forums first.

Pay off any collections, or fight them if that is what you are going to do. Get your receipts, carbon copies/canceled checks/printout from your bank, and call the collections agency for further procedures. Don’t let them muscle you around. This is your money that you owe, not theirs to pry from you.

Must you use any of the other memberships or yearly payouts? How can you compromise?

6. Assault yourself with your flaws. Highlight all the things you bought off of your credit card and bank statements that made you feel guilty, could be considered frivolous, or that you didn’t need. Include finance charges and late fees. Add that up.

7. Take your credit card number off the memory of online shopping or other easily accessible electronic sources. Reduce your functional credit cards by transferring or by paying off, but do not cancel them. Canceled cards bring your credit score down. Right now, good credit is a good goal, even if you aren’t going to use it right away. Then, make some goals for your credit cards, such as:

  • don’t put more on your credit card than you can pay off in a month
    pay your credit card the same day you pay your other bills, regardless of due date (unless you happen to have an extra due date in between, which sometimes I do. Make sure those don’t go unpaid.)
  • Divide any large purchases that you’re going to make into no more than 18 months. If you can’t add that expense to what you regularly pay, don’t put it on your credit card. Buy what you can afford.

8. Make yourself accountable for all your credit purchases. Get some gift card sleeves and write really scary warnings on them. If your magnet strip is not readily available, you’ll think more about running it. If your credit card is scowling at you when you want to use it, you will start feeling guilty, indignant, or proud. Guilty because this is YOUR money and YOUR credit you’re messing with, you know it, and you’re doing it anyway. Indignant because this is YOUR money, goshdernnit! and who are you to question me?! Proud because you have actually used it appropriately and you feel good you did what YOU wanted your money to do.

If you remember that your finances are technical, you can stop treating them like a generality. Your credit score is a benchmark, and one point at a time works wonders. You’re working on beating the system, not necessarily functioning within it. You’re building a relationship with wealth: having buying power is what really matters, not having lots of money.

But what if you’re not solely responsible for your financial situation? There are many couples’ books out there, and they all have different systems but they all share a structure. In Stop Fighting About Money and Start Making it Work for You, the mantra throughout is Do it together and Communicate together. The introduction asserts “if one or both of you are short on the self-discipline it takes to make financial dreams a reality, these techniques will be invaluable.” This grabbed my attention: how can a book give these things to you? I wasn’t disappointed as I read through; at a certain level, as I mentioned, if you have this book you have something, however small it may be. Plus, the first chapter contains a motivation self-analysis quiz. It’s nice when someone can evaluate readiness on their own. The book has other excellent step-by-steps and exercises on working on organization, your net worth, budgeting for your goals, banks, credit cards, investments, and house purchasing. To look for unpredictable, exciting goals for your life and future, there is an exercise for tapping your memory and subconscious that is enticing and potentially something fun apart from personal finance though “ultimately, all choices you make regarding time, energy, and resources will have a financial impact” (pg 37).

So, what about this book makes it for two people? Communication. “Somehow, there is always something better to talk about than money” (p117). A meeting A retreat. Plan to discuss money, and while you’re doing it, keep the negative words “no” and “not” out of your vocabulary. Much like raising children where the power of suggestion in “don’t ” statements is what encourages the children to do it anyway, using these keeps doubt in your voice and mind. Find new phrases for “We didn’t save/ We can’t spend.” Make a goal to give each other some privacy amongst all this communicating. The book calls it an allowance. Let the money you put in your pocket be yours to spend on things you need , and your partner’s theirs to spend on themselves.

The book promotes for some, drastic change. On page 26 it emphasizes practice but doesn’t account for the behavior recommended for when you fail. If you have made a commitment to change and communicate, inevitable failures can disintegrate everything you’ve worked for and are working for. My recommendation for dealing with failure is to speak at that failure; there is the basic “I was wrong” approach, but you need future clues to emphasize your commitment: “I should have told you and I’ll try better.” “I made a mistake and I’ll try to fix it.” “Now we know where a weakness lies and we’ll be more aware.” “This is a mistake and we can work with it.” Even when scientific or mathematic experiments go wrong, issues are analyzed and recognized to be avoided in the future.

All in all, this book , though filled with good savings tips, is perfect for two people needing to add financial freedom of speech into their life, to make money a part of the family, and to reduce the pressure it puts on both partners.

Does starting to take control of your runaway money have to be so involved? What if I’m only willing to commit a little bit of my time and effort right now; what if I want to take some baby steps? Trent on The Simple Dollar site has four perfect opening moves for a more subtle way to make big changes.

1) Enjoy the stuff you have instead of buying new stuff.

2) Lock up all of your credit cards. Don’t carry them with you for a while, but continue to live your normal life.

3) Pick your debt that has the lowest principal left and make extra payments on it.

4) Eat at home more.

That’s it? Yeah. That’s it. Really, everyone could go on all day about starting to make the spending cuts. We can yap and yap giving you lists of technical, simple, or co-operative things to do. We can rate our priorities for you and you can get fifteen different perspectives on your “first steps;” even here, in one place, I gave you three. But it doesn’t matter one lick until you are ready, and the first step to solve any problem is to recognize there is one. You’re here, reading this, and that has already made all the difference.

4 thoughts on “How do you start fixing your financial problems?

  1. One nifty trick I learned with credit reports is this: When you go to annualcreditreport.com, you are entitled to one free report per agency per year. So, you can actually stagger them so you view one every four months (Jan. from Transunion, May from Equifax, Sept. from Experian, Jan. from Transunion, etc…).

    B/c they have to update each other (if a new line of credit is opened, for example), this is a great way to monitor your credit without paying for a service. Plus, every four months you get to deal with just one credit bureau for updates and corrections, as opposed to dealing with all three at once.

  2. You sure can save a ton by making a list before you go to the grocery store. Never go to the grocery store HUNGRY!

    On my blog I have a step-by-step guide to your Free annual credit reports from all three bureaus for anyone interested! Just click on “REAL Free Credit Reports” under “Best of the Blog”

    There pretty easy to get and free, just remember that once you pull them you have to wait 12 more months before you can pull them again!

  3. There are a whole host of ways to start fixing your financial problems, but the most effective one is simply making the decision to do so. Most people stick their heads in the sand, hoping that some external force, be it g-d, fate, family, long lost rich uncle, etc… will take care of their needs. What they don’t realize is that no one cares more about their financial well-being than they do. People often have to go through a period of extreme financial hardship to realize this simple fact.

  4. I like the list, but suspect it would change depending upon the individual. For example, your list seemed heavily skewed toward someone who had a lot of credit card debt (getting credit reports would probably be at the very bottom of any list I would make). Nonetheless, goo d comments!

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