Those of you who have read my book, One Hot Mama, know that money and I have not always had a great relationship. I went from an ignorant fully-supported college student to a completely broke graduate student. By the time I was making a great salary as young professional, I was living in super-expensive Newport Beach, Calif. barely able to make ends meet and began slowly accruing debt. I have had to learn financial skills through the school of hard knocks, and I still sometimes fall into old habitual ways of feeling deficiency and stress around money.
My recent interview with Kate Northrup, and reading her fantastic new book, Money: A Love Story, has inspired me to dig deep into my own relationship with money. Turns out, it's improved dramatically.
I want to share with you exactly what I have done so you, too, can achieve your own financial freedom!
1) Get Honest With Yourself
Have you ever avoided opening an envelope from the bank because you were afraid to see what was inside? Have you been scared to sit down and calculate the actual numbers of exactly what you owe and to whom? It can be so stressful and sometimes the way we deal with it is to ignore it. There was a time that I was guilty of avoiding my bank statements because I didn't really want to see what was there.
It is refreshing to finally get honest with yourself and know exactly where you stand. Write out every dollar that you owe and write out the interest rate of each debt. It may not be pretty, but now you can create a plan and feel a sense of control.
Start trying to feel grateful for what you do have, and excited about all the things you will be able to purchase, experience, and support with your money in the future!
2) Create a Realistic Budget
Developing a budget that guides you to control your spending helps you to become more aware of how you spend which is integral to creating financial freedom. The mere exercise of evaluating your spending habits might shine light on ways you are wasting money. How can you spend less? What can you cut out?
Make sure your budget is comprehensive and includes all of your income and expenses, including a realistic allowance for spending money. It is so important that you do everything you can to stick to this budget. This will help you develop discipline and build excitement as you watch your debt reduce and savings increase.
You can align your entire life to ensure that you are spending your money in alignment with your life's goals and dreams!
3) Reduce Spending as Much as Possible Until Debt Is Paid Off
I know this seems like a no-brainer, but I am telling you, it's where most people screw up! When we work hard we often feel entitled to an experience or new purchase. Try to savor all the amazing things you already have and make being thrifty fun! Make the very best of the clothes you have and make your surroundings as beautiful as possible. Expressing gratitude for what you already have is one of the best ways to attract more wealth into your life!
The simple things in life are the best, and living simply can be wonderful for your entire family!
4) Create a Debt Budget and Eliminate Debts
Once you know exactly what you owe, you need to create a debt budget. Your debt budget is all the money you have left over after you've paid for all of your required and necessary expenses and spending.
Start by listing all of your debts in order of highest to lowest interest rates. To begin, you will pay only the minimum required payment for each debt EXCEPT for the one with the highest interest. You will pay as much as your budget will allow toward that high-interest debt until it is completely paid off. Then you will go to the second highest interest rate debt and do the same thing until the second highest interest debt is paid... and on until all of your debts are paid off! How awesome will it feel to be debt free?
Once your debt is all paid off then you can put that money into investments and savings. That is when real financial freedom begins!
5) Make More Money
This might seem obvious, but the fastest way to be debt-free and have more money in investments and to enhance your lifestyle is to make more money! What are your talents and gifts? What would people pay you for? Any extra income helps, even if it's only an extra hundred dollars each week!
Gaining financial freedom does not have to be overwhelming. The moment you choose to take control and implement these simple steps, you have already taken the leap toward true financial freedom. Do you have additional tips to share? Have you tackled this daunting task and been rewarded the freedom of living debt free? Share your experience with us!