The first quarter of the year is now over, how are your finances shaping up?
I must admit that personally, I’m not off to a good start. My hard-earned money’s been slipping through the cracks!
Today I am going to share with you, dear reader, the first step that I am taking to get my personal finances back on track.
Finding a Financial System that Actually Works isn’t Always So Easy
I don’t know about anyone else, but over the years, I think I’ve read and studied most of the popular plans and systems put out by the various finance experts and self-help money gurus. Some say to focus on putting back enough savings for a short-term emergency fund before you start to tackle your debt. Others recommend getting started by saving at least 6 months of your expenses.
There are then other finance advisers that say you need to first break up your income into little groups of money that you set aside for the following categories: expenses, debt repayment, savings, investments and also a little “fun money” so you don’t get burned out and “cheat” on your financial diet with impulse/binge shopping.
Each of these strategies sounds great, in theory. I am sure each works well for many people, probably millions of people. They just don’t work for me.
The Importance of Bringing Your Accounts Current and Making On-Time Payments
When my finances get really out of whack, as they are now, I start by looking at all my payments that I am making each month. I then ask myself one question: how many of my payments am I making on time?
To me, it makes little sense to cut back and save for an emergency fund if you can’t make your payments on time. Making payments on time isn’t just about improving your credit score.
If you go back and add up the late fee that you are charged on each account each month, it usually adds up to quite a significant sum. For me, these late fees easily add up to an amount that, if eliminated, would easily fund an account that’s set aside to take care of small financial emergencies.
So that’s where I start. I look at my regular recurring monthly payments and ask myself if I have the money to make all of them on time. If not, then I do what I must to start paying each one on time to avoid those $5 and $10 late fees.
The High Cost of Small Late Fees and Overdraft Charges
I’ve had a lot of unexpected medical expenses come up over the past 4 to 5 months. This has thrown our budget completely out the window.
Add in some unexpected reductions in income due to not being well enough to work as much as I usually do, and I am now paying several of our household bills about 2 to 3 weeks late. This means that a late fee is added to the next month’s bill for each one.
So, how many late fees have I been charged just this month?
Type of Bill Late Fee
Total Late Fees This Month
Total Overdraft Charges for the Month
Total “Lost” Money for the Month
It’s not just late fees that are stealing away my money. There are also returned check or overdraft fees. My bank charges $35 a pop for those, and I’ve had three this month for a total of $105!
If I do nothing and keep incurring these small charges at the same rate, and for each month this year, that adds up to $152 a month, and $1,824 a year!
Nearly, $2,000! Wow! That’s an amount that would go a long way to starting an emergency fund, or even paying off some of my smaller debts!
My Personal Financial Strategy Going Forward
To get back on track fast, I need to increase my income, at least temporarily.
So, today, I got my calendar out and figured out just how much money I am going to need to make each week for the next two months so that I can bring everything current.
I make most of my living as a freelance copywriter. To increase my income, I’ve figured out just how many assignments I am going to need to accept and write each week from my regular clients to make enough to get caught up.
Let me tell you, it’s not going to be easy.
I basically need to earn $500 a week for the next two months. That means I need to write 20 articles each week, and, write them for clients that I can depend on to pay me on time.
Now, I’ve written way more than 20 articles a week in the past, and on a regular basis, but, that was before my current health issues. So, it is really going to be a struggle, to say the least, to get back into my regular writing groove and knock out great content for each of my clients, day after day, week after week, to get caught up.
Short-Term Financial Goal #1
My goal is to eventually get my income “synced” with my expenses so that I am paying at least a little in advance so that I don’t have to worry about something coming up and not having the money to cover it and winding up with another late charge or overdraft fee.
Worst case scenario, I am hoping to bring everything current within two months, but preferably sooner. Once I am current, then, I can start thinking about “saving” some of the funds that were previously slipping through the cracks.
I figure three months after I “stop the bleeding,” and start saving the funds that were going to pay for late charges and overdraft fees that I will have easily saved $500 to put towards a short-term emergency fund.
Look for a follow-up post sometime in late August where I will hold myself accountable by updating my readers with my progress.
What about you? What’s the number one step that you can take today to get your personal finances under better control? If you have any tips on how to cut expenses, save money, or otherwise improve financial stability, please share your ideas in the comments section below!
Photo Credit: Alehandra 13 via Pixabay