Basic Financial Fitness: Adopting a Smart Money Mindset

Recently, I talked about how there's no financial advice out there for regular folks. I've decided, then, to start giving out the wisdom that I've learned over the years. No, I'm not an expert, but I am a regular person with not a lot in disposable income; who still lives largely paycheck to paycheck; and who has spent a nice chunk of their adult life making stupid money choices and fumbling around. 

Out of necessity and sheer determination, I set about learning how to control my finances and stop letting my finances control me. Over the years I've looked to the internet, books, and even friends, to help me navigate my way through, but have found advice for the Middle-to-Poor Class (i.e. regular folks) of people to be completely lacking.

 So, while I'm no expert, I've gotten really good at managing my money, and I have started learning how to invest for my future. If you want some commonsense advice for managing money as a regular poor to lower middle-class person, and even beyond, I'll give you my two cents. (If you want to know more about me as a person and what I do, head over to my "Who Am I" page.) Here then is a new blog series I'm starting called Basic Financial Fitness to help people like myself using what I've learned.

Where do we start? Here: the first thing one needs to do if they want to start learning the money basics is to adopt a smart money mindset. How do you do that? Keep reading.

Adopting a Smart Money Mindset

1. Do not spend more than you make. 

This seems like a no-brainer, right? Well, it's the simple truth. If you spend more money than you make, you're going to have money issues almost immediately. They say money is the root of all evil, but that's a lie. Spending more money than you make is the root of all evil. This is how massive debt is accumulated, and to say it's a problem is an understatement. For example: the average American household debt (including home mortgages) is $135,924 as of December 2016. The average household credit card debt for the same time period is $16,425. That's insanity!

2. Don't spend your money before it gets here.

Do not plan out all the cool things you want to buy and fun activities you want to do before your paycheck even arrives. In fact, don't even think about your paycheck until the day it hits your bank account. The reason? It's easy to slack off on your bills if you have all these things you want to purchase with your "next paycheck". Regular folks like us don't have much, if any at times, disposable income, so to start spending it before it arrives is not only dumb, but irresponsible. 

3. Own up to your debts.

This can be a hard one for people. You might have one or two, or even more, little bills floating around out there that need to be taken care of. For example: that $40 co-pay at the doctor's office, or a $120 final bill from a daycare that you used to take your kid to. Do not ignore these bills! They will not go away if you ignore them, and, oftentimes, it will swell up with interest/late fees and will, eventually, go to collections. You never, ever want bills to go to collections.

4. Adopt a simple method for paying your bills.

Now, I'm not saying you need to come up with some mind-blowing, fantastic budget. Most regular folks, honestly, don't have enough income to budget every aspect of their lives...they just don't. Regular folks need to be able to pay their bills, in full (or on a payment plan) and on time! Leftover money can then be allocated to things like food, gas, and household supplies.

5. Be realistic.

We all have things we want, every single last one of us, but wanting things and being able to afford things we want are two different things. Do not confuse the two. There's a cool tattoo I'd love to get, and I would love to have a new outfit, but I need to put food in the fridge and I really need electricity.

6. Get organized.

The best way to get your financial house in order is to keep order. Get organized with your bills and stay organized. It's the best way to keep track of your finances.

7. You don't have to spend money to have a good time

This right here is one of the biggest barriers for people, especially regular folks, to getting their finances on track. We've been inundated and raised in a consumer culture and, because of it, we feel that we need to spend money to have fun. Look around you...everything costs money. Furthermore, a direct result of this consumer culture has led us to feel entitled. We feel we're entitled to that outfit, that meal out (even if it's cheap, then we'll really justify it), or that evening out with friends. I'm here to tell you no, no you're not. You work to subsist (unless you've got lots of disposable income) and put away a bit of savings every time your paycheck rolls around. Unless you make tons of money, get over it. I can't tell you how many times I've heard someone say that they can't afford to save money but yet they go out and spend money constantly whether it be eating out, grabbing a cup of coffee, buying a CD, or a new outfit. Americans spend roughly 43% of their income on eating out! "Well, I only spent $3 on this meal at the Bell, and I deserve it for working." Yeah, and that's money in addition to your groceries and it still costs more, dollar for dollar, than if you made it at home. If you don't get this sentiment of spend, spend, spend out of your'll always have financial troubles.

So, how can you deal with the aforementioned points?

1. Get real about your finances and your spending habits. The easiest way to do this is to spend a week keeping track of the money you spend everyday. Keep all your receipts, log them in a notebook, and tally them up at the end of every day. Tally them up again at the end of the week and see where your money has gone. I guarantee you'll be quite surprised, and that you'll see where you can save money. The goal here is to live below your means while still being responsible.

2 & 4. (These two go hand in hand.) When your paycheck hits your bank...that's when you sit down and pay your bills. I highly suggest using the Budget Folder method I talked about back in October. It's detailed and a great way to pay bills when you live paycheck to paycheck.

3. Understand that your debts aren't going to go away. They just aren't. So, the sooner you accept them and formulate a plan to pay them, the better off you'll be. I work in the financial world, and I can tell you with all certainty that any payment is better than no payment. If you have to, make a $5 payment every month on something rather than ignore it. $5 isn't much to part with and it will keep collections from happening. Best of all, it -will- pay your bill eventually.*

5. Have an honest conversation with yourself, and the people you share a life with if applicable. What do your finances look like? Do you want to get in control of them? Where do you see yourself in five years? How do I turn this around?

6. Get organized! Again, you can refer to my Budget Folder method, or adopt one of your own, but get your finances organized. Even if you just keep a list of your expenses, debts, and're making headway!

7. Get this into your head now (and keep it there): IF YOU THINK YOU HAVE TO SPEND MONEY TO HAVE FUN OR FEEL ALIVE THEN YOU ARE SCREWED. There are a million and one ways to have fun that cost nothing - or very little - that there's no reason to get trapped into spending money (this is another future post I'll make). I know this one is hard, especially if you have friends that are always asking you to do things that cost money, or if you feel left out because other people are doing things that cost money and, while you want to as well, can't afford it. Sometimes it's better to be honest with other people & yourself and say, "Not this time. We're/I'm trying to save money and/or get my finances on track. Have fun though!" I've done this before. I'll usually make excuses (there's nothing wrong with this if you don't want to admit you're broke), but sometimes you really do have to be honest. Honesty is better than going out with friends instead of paying rent/electricity bill/debt that needs to be paid off.

This is just a foundation for learning financial fitness for regular folks. In coming posts on this topic, I'll cover things like credit cards, having fun for next to no money, and saving on a shoestring. Until then, have a great week!


*I don't recommend paying $5 a month on debts as a standard, but it will do when you're already squeezing as much out of a dollar as you can. Also, this does NOT apply to credit card bills. This blog runs off the assumption that most regular folks don't use credit cards. That's not to say that regular folks don't use credit cards, it's just not as common. I WILL cover credit cards in another post down the road sometime, but this is not that post. Let's get the financial basics in order first. :)

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