“I need to get my shit together so that I can start saving some money.”
I’ve heard this many times from friends who are struggling with getting life in order. They want to save money and move forward. They just don’t know where to begin.
You’re not alone. I had to learn about money the hard way. Real life hits us real fast. You go from trying to pre-drink on a Thursday night to dealing with rent and trying to get a promotion from a job that barely pays you enough to survive in the first place. Here’s how you can finally start saving…
How do you make sense of personal finance?
There’s no manual for figuring out things like how to start saving money when your pay sucks or trying to save up for a vacation so that you have something to look forward to.
I was 18 when I realized that I had to do something about money management on my own because there wasn’t anybody eager to teach me.
I was a greedy teenager who wanted to have money to do what I wanted to. I started reading personal finance books and blogs in hopes of finding a way to get rich (spoiler alert: I never really found that).
I mostly read get rich stuff filled with useless motivational quotes. I’m assuming that’s where everyone starts. I want you to stop that right now. No more empty inspirational quotes or get rich quick schemes where you have to sell oils to friends and family. It’s time to do something practical. I consumed plenty of incorrect information. You’re lucky because you don’t have to do that. You can start off with tested information.
Here’s how you can get your shit together when it comes to your bank account and overall financial situation…
Step #1: Figure out where you stand.
You have to figure out where you stand today financially. This won’t be pretty, but you have to go through it. I’m not a fan of extreme budgeting or tracking every penny, but I want you to know where your money’s going. I want you to find the leaks and the major issues that are holding you back from having any money in the bank.
[Must read: How to add $1k to your bank account next month.]
This is like taking a “BEFORE” photo before starting a new diet or training program.
Sometimes the worse the before photo, the better the story. I want you to know that we all start somewhere. There’s no need to be ashamed. This isn’t the end of the world. It’s just your bank account. Being in debt doesn’t mean that life is over. You just have to know where you are.
Figuring out where you stand financially comes down to two important factors:
- How much money do you owe? What are your debts? What are your expenses?
- How much are you bringing in? What’s your income like? Are you bringing in enough money?
Let’s break these down…
How much money do you owe?
What are your debts? Do you have student loans? Do you have credit card debt?
To start saving money, you want to know how much you have to pay back first.
Here’s everything that you need to look at first when it comes to your debt:
- Student loans.
- Credit card debt.
- Other loans (car, phone, etc.).
Now I want you to look at your fixed expenses:
- What’s your rent like? Do you have renters insurance? Do you have a mortgage?
- How much is your cell phone bill?
- Do you have a premium Tinder account?
I want to you know how much you owe in total and what your FIXED (expenses that you have to pay no matter what) monthly expenses are like so that you know how much money you should be bringing in every month.
Now let’s look at the other side of the equation…
How much money are you bringing in?
What’s your income like? How much money do you have coming in after taxes?
There will be scary aspects to this. You may find out that you’re putting out more money than you’re bringing in.
I’ll be brutally honest: I still hate looking at the numbers sometimes. We all wish that we could be making more money.
Download my two worksheets for free:
- What’s your net worth like? Track your income/expenses. I use this spreadsheet to get an accurate picture of the current situation.
- What are your monthly expenses? It’s important that you write everything out so that you know how much you’re spending every month.
At this stage it’s important that you don’t look at ridiculous success stories because they say that comparison is the thief of joy. We’ve all heard about the homeless person who became a millionaire over 6 months or about the couple who lives in a van making 8 million dollars. That stuff will usually discourage you.
Let’s move on…
Step 2: Figure out your goals.
Do you want to pay off your debt? Do you want to save $10k?
I find that it’s important to have a very specific goal.
Here are specific goals that you can work towards:
- Pay off student loans.
- Save up to move out of your mom’s basement.
- Find a way to bring in an extra $1,000/month.
- Save up for a downpayment.
- Save up $10,000 to quit your job to pursue that business idea.
Here are unrealistic goals:
- Get better with money.
- Be financially responsible.
- Get rich quick.
- Chasing passive income when your active income sucks.
- Go from zero to one million dollars in 30 days with some “proven method.”
You need something that gets you excited about personal finance. It can be the idea of being debt-free or the possibility of going to Europe.
Check out some of our case studies of regular people who accomplished common financial goals.
Step 3: Look for easy wins.
Do you have any easy wins that you can go for?
This is where you go for the low hanging fruit. You try to tackle the small things that aren’t that exciting.
Here are some common examples of quick wins:
- Cut a subscription that you don’t use any longer.
- Stay in one night on the weekend.
- Ask for a raise.
- Pick up extra shifts.
- Try to work a part-time gig.
The trick is to build some momentum as you get serious about your finances.
None of these tips are life changing. However, every little bit adds up when you’re trying to move forward. You won’t always get a home run. Sometimes you have to get on base (hopefully that sports analogy makes sense).
Step 4: Go for the big wins.
With the easy wins down, it’s time to go after the big wins or one huge win.
What are big wins that you can go after as you try to save some cash?
- Look into switching careers. Can you upgrade your skills? Can you look for a different job?
- Hold off a major purchase. It’s tempting to want to do everything at once (move out, buy a new car, buy a new wardrobe, and son). Try to hold off on making any huge purchases before you figure out your next step.
- Save on one of the major expenses. Most people spend a ton of money on transportation and housing. Can you cut back on one of these as you save up? You may have to live with roommates or take the transit while you try to build that bank account up.
Try to get one big win ever 3-6 months. If you’re confused, you can leave a comment or shoot me a message.
Step 5: Start bringing in more money.
Does your job pay you enough? Could you improve your income?
Once you run the numbers you may find out that you’re not even making enough to cover your expenses. You have to do something about it.
I find that the biggest issue for most who are new to personal finance is that they’re simply not bringing in enough money.
You have a few options when you’re not earning enough money at your job:
- Get a part-time gig. Can you get a weekend gig? Could you pick up extra hours?
- Find a way to upgrade your skills to bring in more money. Can you take courses? What about additional training?
- Start a side hustle. It’s difficult to survive on one income. It’s more important than ever to have multiple streams of income (especially after experiencing the chaos of 2020). Check out our side hustle guide to help you get started.
Those are the three main options. None of them are easy, but you need to do whatever it takes to bring in more money so that you can save more and eventually quit that job you hate so much.
Full disclosure: I won’t sell you the dream, but choosing the right side hustle could change your life.
[Try the $10k challenge. I want you focus on increasing your net worth by $10k in six months.]
Step 6: Remember that it’s a long game.
This is the part where I have to give you the whole losing weight analogy. You didn’t put the weight on overnight. You ate like crap for years and didn’t exercise. Now you have to put the time and effort in.
It’s important that you set clear goals and deadlines. Then you just try to tackle one day at a time.
Most people who want money in the bak often look for shortcuts and gimmicks. It’s tempting to try to find a way to bring in huge money fast or to try to scam the system. I’m not here to be the fun police, but you need to hear this. You won’t fix your financial situation overnight. It took you a while to get broke and to be where you are right now. It’s going to take more time to get out of this mess. Start slowly and make things happen.
Extra step: Enjoy the ride.
If it feels like work, then you’re going to get bored quickly. I’m not here to lecture you about all of that hard work stuff. It’s okay to enjoy the ride.
How can you enjoy the ride?
- Plan little trips. A quick night away can help you reset.
- Work with people who are fun. Try to be around positive people wherever you are.
- Find time to play. There’s always time to go for a bike ride.
- Stop stressing. I know that it’s easier said than done. You can’t worry about your past mistakes. Stuff happens. All we can do is focus on getting better.
Your goal isn’t to get rich overnight or to figure everything out at once. You have time. You just want to get your shit together.
It’s going to get annoying at times. You’ll feel embarrassed and anxious. You have to go through these emotions though.
Start here with the only introduction that you need to say goodbye to being broke forever:
When you’re ready to invest your money, here’s where you can start:
- Find out how Questrade makes investing easy.
- Look into Wealth Simple for investing.
- Feeling lost? Investing for beginners.
Check out our episode of Studenomics TV for finding motivation to save money:
Good luck with your getting shit together. This whole personal finance journey won’t always be exciting, but I promise you that life’s better when you can finally afford to travel or go out for a steak dinner without stressing about it. Let us know in the comments what gave you the motivation to start saving money…