Dear Johnny Q&A: I'm Tired of Being Broke, Where Do I Start?
Question: I am 31 years old, married with 2 children. I feel like we work hard, make good money but have nothing to show for it. I am tired of being broke. Where should I start?
Thank you for the question! The majority of people do not put the time and attention needed into their finances hence why the majority of people never achieve financial security let alone financial freedom. You have leveled up and are now conscious about money and interested in how it works. Let's dive in!
Step 1: Sit down with your spouse and build a budget.
List all your monthly expenses, EVERYTHING YOU SPEND MONEY ON.
List all your monthly net income sources and amounts, MONEY THAT GOES INTO YOUR BANK ACCOUNT
Decide where cuts can be made. Most people can trim $500-$1000 per month in wasted spending.
Calculate the difference between expenses and income. If you are in the positive this is profit and now your disposable income. If you are in the negative you need to cut expenses, make more money or do both.
Automate the disposable income to be invested into an asset class (stocks, bank account (savings), or some other investment vehicle. Automation is key.
Track your monthly spending. If you spent more than normal, why? If you had more profit than normal, why?
If you are nervous to do this activity, you are most likely spending foolishly.
You must understand where you are spending your money. Most people know how much they make, but few know how much they spend and where they spend it. You trade the most important resource in your life, TIME, for money but do not invest the energy into knowing where these funds are going? Time spent away from your spouse, kids, loved ones, on boring flights, sitting at a desk under LED lights, eating fast food so you have time to get back to your desk on time. YOU SACRIFICE ALOT for money. The least you can do is know where it is going, spend wisely and invest the rest into securing financial freedom for your family.
Step 2: Calculate your net worth annually. What is your financial worth?
List out ALL your assets. (Savings, cash, investments, real estate, vehicles, collectibles, firearms, gold, crypto, anything of value that can be sold for money. (current market value) Leave out small items under $500.) The big-ticket items are the most important. If the majority of your net worth are items sitting in your back yard rusting, I recommend selling them.
List out ALL your liabilities. (debts)
You can download our Betternance Scorecard here and complete your net worth.
This is a great starting spot. Grab a pizza and your favorite drink, relax and have fun with these two activities. Having clarity and an optimistic outlook on your financial future will provide an unbelievable sense of peace and happiness. Update us on your progress down the road and good luck!