Many people struggle with money issues, but the sad truth of the matter is the very few people consciously do anything constructive to solve their problems. That this is so is clear when one considers the basic, real solution: make more, spend less.
When I worked as a financial adviser, this was our "one size fits all" financial prescription for everyone. We said it jokingly around the water cooler and not to clients, of course, but in the joke there is an undeniable truth. Mastering one's personal finances is simply a matter of making your income greater than your expenditures, which can be accomplished by increasing your income, reducing your expenditures, or a combination of the two.
But how to accomplish this, exactly? There are four things that I do that have helped me to increase my income and positive net worth, and to eliminate debt (and, as it turns out, hard core budgeting isn't one of them!).
Step 1: Seek and exploit new opportunities
In wrangling with my own financial well being, I came to the realization that I was not taking as many opportunities for income as were available to me. What I am speaking of here is not strictly formal paid employment, but mainly "odd job" sorts of opportunities. I believe that many people will pass these little opportunities by thinking that they are not worthwhile because the income they offer is not consistent or it is small (or both).
This is not to say that regular, part or full-time work in addition to what one already does is not better, but one should keep an eye out for - and be prepared to pounce on - any opportunity that comes one's way, no matter how great or small (if faced with a choice between two opportunities, one should always take the more lucrative, naturally). Keep these things in mind: one penny is worth more than 100% of zero, and small amounts add up!
Helium is one such example of an opportunity that I am speaking of here - the income is admittedly very small per article, but over time it can add up. If you have nothing else going on at the moment, sign up and start writing!
Step 2: Act in Accordance with a Goal
To avoid spending unconsciously, many people draw up budgets to track their expenses. Typically, people will break their budgets down into categories and attempt to restrict their spending to the amounts they designate within each category. While this certainly can help one to establish some discipline, if left at that, this method of gaining control of one's finances carries with it the seed of its own undoing: lack of purpose.
Essentially, without a specific goal in mind, most people's budgets will go the way of most fad diets. People will stay on them for a while, but then they'll get bored, slip, and go on a binge. Many will then try to "get back on the wagon" and start the cycle all over again. Therefore, if you decide to set up a budget, do not just do that, but also give it purpose. Establish a "why" for your budget, even if the purpose is to get out of debt; you need a goal to work toward, or you will be like a ship without a rudder, and your repeated failures will leave you frustrated and angry with yourself.
Step 3: Practice Mindfulness
It is this step, following on step 2, that is behind my prior comment on not doing hardcore budgeting. Basically, I do not keep a strict budget because I have my goals firmly in mind. That sounds counterintuitive, but it makes sense when you consider how my spending habits are affected by it.
When I find myself confronted with the temptation of spending on something (other than necessities), I simply ask myself, "how will this help me reach my goals?" Asking this simple question, with my goals in mind, forces me to honestly evaluate the trade off between present gratification and reaching my goals sooner - if I spend my money now, it means it will take longer to accomplish what it is that I really want to do. More often than not, I decide against spending my money on what immediately confronts me.
While I do track my expenditures with Quicken - keeping books is essential - I do not feel a need to confine my expenditures within rigid budget categories. Additionally, it seems to me that many people who set up budgets then feel comfortable "maxing out" their categories, which means less possible savings overall. Through my approach, I avoid this problem (though if you still want to set up a budget, which I am not saying is wrong to do, my approach can certainly help you keep your budget!).
Sometimes, I splurge, which can be a healthy thing to do; again, as with dieting, sometimes you have to purposely let yourself "cheat" so you can maintain your discipline the majority of the time. Since I began handling my expenditures in this way, I now regularly find myself with plenty of cash left over at the end of each month, even if I have a bit of fun from time to time, which is where my last step comes in.
Step 4: Make Your Money Work For You
Put simply, you should not have idle cash. The term "idle cash" refers to money that is not deposited or invested somehow, not earning interest, dividends, or in some asset that increases in value. This can be done in many ways with varying degrees of complexity, so you have plenty of options here. Personally, I like to buy dividend paying stocks in groups of three such that one of the three will pay out a dividend each month of the year, as long as the annual dividend rate of the three exceeds the interest rate of my debt. I make extra payments toward my debts if I cannot find such a trio of stocks at the end of each month (I wrote a separate article on this, which is accessible through my Helium profile, entitled, "Investing For Dividends: Buying Stocks in Threes"). There are many, many more techniques for putting your money to work, so you should find the one that makes the most sense for your present situation that you are comfortable with.
In summary, solving your money problems is, as I said before, simply a matter of making more than you spend. That is just an empty maxim without a strategy, of course, which is why you must make it a conscious effort: seek and accept new opportunities; keep your goals in mind, not just a budget; stay mindful of what it is that you really want at all times (but don't be afraid to have a little fun); and set your extra money to making you more money.
You may find, as I have, that even before reaching your goals you'll have developed a sense of well being when it comes to your finances (but not complacency), which gives one great relief from financial stress. Eventually, you will find that your financial challenges have been solved, replaced by your growing fortune.
Here's to your success!