8 Steps to More Money

Who doesn’t want more money? I do not know anyone personally, but if you do please let me know about them in the comments. The truth is, we all would appreciate some more dough laying around. But why?

Why do we want more money? Will it make our life better, or easier in some way? Will it make all the problems go away? Will it find a cure for cancer? The answer to all of these, and more, is no. Money is not the answer and never will be.

So that does not solve our problem. Why do we want more money? Why do we think we need more money? I can answer that one and you probably already have as you are reading this: to buy things. (find stat on how much money is spent every year on advertising). A majority of the population does nothing else with their money but buy things. And can you blame them? Advertising budgets continue to rise and for a good reason (for the companies)! The sellers out there KNOW that if they keep pounding into your head that you NEED their product, that eventually you will buy. This is one of the reasons that the average American spends $1.20 for every $1.00 they make.

What if I told you there was a way for you to HAVE more money? And WHAT IF, I gave you the secret to KEEPING your money? Would you pay $39.95 for my e-book!? Just Kidding! I hope you wouldn’t, because what I am going to show you today is common sense stuff that has been hidden by years of culture change and refocus. The 8 Steps to More Money below are FREE of charge and RECOMMENDED for you and your friends. They are painless, for the most part, and will pay HUGE DIVIDENDS if you are disciplined!!

Step #1: Complete the 30-Day Challenge
For 30 days track every penny that leaves your pocket and bank account. Sound easy? Good, get started. The point of this exercise is to prepare for your budget (or as I like to call them spending plan). You will see, over the course of 30 days, how much money you are capable of spending. You will see the good and bad spending (bills being paid vs. movie tickets every Friday night). You will notice where you shop the most and where you shop the least and where you do not shop at all. Most of all, you will be able to see where your money is going! That’s right, you will know exactly where your money is going. Read this article for more information on The 30-Day Challenge.

Step #2: Prepare a Monthly Spending Plan
Once you have completed the 30-Day Challenge, you have the ground work down for starting a monthly spending plan. In the 30-Day Challenge you counted every penny that you spent and at the end of the month could tell where each one went. This spending plan will show you in advnace where every penny is going to go in the days ahead. This way, you know ahead of time if you have enough pennies to go around. A spending plan is going to hold you accountable to your NEEDS. You will get deposit that pay check and will know how it is going to be spent and how much is going to be saved. This is your road map for the month, and just like any map, if you follow the directions it will take you to your destination. Read this article for more information on creating a Spending Plan. You may also want to browse our Tools page for additional resources that you may find beneficial.

Step #3: Save $1,000.00
You’d be surprised at how many people out there do not have $1,000 sitting in a savings account just collecting interest. It is rare and this is not good. Just imagine with me: you are a single guy living in a small apartment. You have a job paying $25,000 before taxes, 401k, and medical. Assume that after those deductions you earn $18,312. You give 10% to a local charity, leaving you with $16,480.80. Take out 12 months of living expenses (assume $850/mo) and you now have $6,520. Each pay day, you notice that after deductions, giving, and living expenses, you still have about $200 left over (this is our $6,520 above). So you go out with friends every Friday night, buy new items on a regular basis and pick up a car payment. After a while you notice yourself getting tight on money so you apply for a credit card. You begin swiping and swiping, not keeping track of anything. One month, your car breaks down and can’t even drive off of the mechanic’s property. It needs fixed now. You now you have $0 funds available in checking and never put a penny in your savings account. You think of all the credit card debt you are slowly (but surly) racking up and you begin to get nervous. You know that putting this car fix on the credit card is not good, but you really do rely on the car, so you hand over the plastic.

The important part of the story above is the car fix that turns out to be a major over haul. It required more cash than our character had available in checking and he hadn’t saved a penny for a rainy day. So what does he do? He used his credit card. Now, if he would have saved $1,000 at any point in his life before that and had it sitting in his savings account he would not have had to use his credit card. He could have stayed out of deeper debt and used cash instead; cash that was saved up for such a time as this.

Save $1,000 dollars and have it sit somewhere that is hard to get to (i.e. not connected to a debit card) but still accessible when it is needed. This “fund” is used for any expense that pops up and is unexpected. Read this article for more information on having an emergency fund.

Step #4: Pay off credit card debt
That’s right, get rid of it. Focus all of your extra cash at getting this debt out of the picture and into history. You do not want to carry this debt with you ANYMORE. A part of paying this off may mean cutting up your card(s) so that you are not tempted to use them (as you are trying to pay them off). Do so. Do not hesitate. Throw a party as you do it to make it easier on you. Just get rid of the cards and eliminate the debt as soon as possible.

As far as how to go about removing your credit card debt, I will admit to you that I cannot speak from experience. I have never had credit card debt and I plan to keep it that way. From what I have heard, pay off the smallest balance first and then go after the bigger fishes. Paying off the small one frees up more cash quicker than starting with a big one, giving you more cash sooner (rather than later) to throw at your other balances. This is a snowball affect that I have heard great things about. From here, you may want to check out My Dollar Plan’s article on this topic.

Step #5: Save One Month of Living Expenses
This is another amount of money that you should have sitting somewhere that is hard to get to but still accessible when needed. This is not hard to explain, especially if you have done the 30-Day challenge and started to live on a spending plan. You should know exactly how much is necessary for you to live one month at a time. Save that amount and keep it somewhere safe. Nothing in this world is permanent and that goes for your job as well. You could get fired today, or be laid off tomorrow. You just never now. Having this month of expenses set a side will give you time to really get out there a look for a job. You’ll still be getting paid, in essence for your job hunting, especially if you make looking for a job your FULL TIME JOB. Save that one month and give yourself some breathing room.

Step #6: Pay off all consumer debt
As of this writing, this is where Lindsay and I are currently at. This step is similar to step #4 (credit card debt) but is consumer debt. This would be any outstanding student loans, car loans, or other personal loans that you may have. I would use the same snow ball method to eliminate these debts. Pay off the smaller one first then “snowball” that money into the larger debt and go from there. Once you have completed this step you should have all of your debts paid, excluding a mortgage if you have one. CONGRATULATIONS!

Step #7: Save Three Months of Living Expenses
Again, this step is similar to step number five but instead of one month you are saving for three additional months of living expenses. The idea here is cushion, and a lot of it.

Step #8: Begin to save for a 20% down payment on a house
Yes, you read that correctly, save for no less then a 20% down payment on a house. Any less and you will be stuck with paying PMI (Private Mortgage Insurance) in addition to all of the new expenses that will come with owning a home. If you can eliminate one expense all together, why not do it? Save. Plan ahead, and prepare to put 20% down on a house (more on this on Thursday).

There you have it. The 8 steps above will give you more money. Not money to spend, but money to save. If you are patient and disciplined with your spending and saving habits you will notice your savings account beginning to increase, your debt starting to go away, and peace of mind starting make more and more sense.

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