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Quick Money Makeover

Posted March 3, 2014 by Kelley Long in Life After Five
money makeover


“Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.” — Will Smith

Seventy percent of Americans live paycheck to paycheck, according to Dave Ramsey, author of the best-selling book Total Money Makeover. Most of us like to think we’re in the “good” 30 percent, but what would happen if you encountered an unexpected financial emergency such as needing a new furnace or having to replace the tires on your car? If you would have to resort to credit cards to take care of this expense, you are living paycheck to paycheck.

Any financial planner will tell you that credit cards should not be used for temporary loans. If you cannot afford to pay your credit card balance each month, then you need to put them away and get on the money makeover train. Exiting denial and realizing that you need a money makeover is the first step to financial independence.

The next step is committing to make changes in your money habits so that you can break your credit card dependence and begin paying down your debt. I will be the first to tell you from personal experience that this is MUCH easier said than done. When I graduated college back in the day, I took the summer off to enjoy life. By the time I started my first “real” job, I had acquired more than $8,000 in credit card debt. As the minimum payments crept higher with interest rates increasing, my budget squeezed tighter and tighter. I knew that I needed to change my ways when I only could afford to eat Ramen noodles for a week while I waited for my next paycheck.

Taking control of your spending and merging onto the road of credit card pay-down is a long process. Much like a diet and exercise plan, it requires discipline and patience to stay the course before you will see real results. Most people fail because they make sudden, drastic changes that are not sustainable over the long haul.

Rather than putting yourself on a tough plan with no wiggle room for error, try to start small. Perhaps the first step is just to increase all your debt payments by $5 each month. The next month try increasing $5 more. I tried this with my debt, and before I knew it I was paying double my minimum payments.

Next, open a savings account and have $25 automatically deposited from each paycheck. Don’t look at this account and try to forget that it is there. In six months you will have saved $300 if you’re paid bi-weekly. You will be surprised at how you won’t miss that extra money if it is never there to spend.

There inevitably will be times when you fall off the wagon and splurge on something you don’t need and can’t afford. It is important not to beat yourself up about these times. Just get back on the ride and be gentle with yourself. And as you come across little windfalls of money like a larger tax refund than expected or a work bonus, commit to putting most of this money (if not all of it) toward paying down debt. You’ve already spent that money, now it’s time to pay it back!

Of course these tips are just the beginning. If you are serious about making a difference in your financial future, I highly recommend Dave Ramsey’s aforementioned book. If there is enough interest in going through the exercises with group support, I would be thrilled to form a Chicago-based book club to assist readers with getting on the wagon together. Just e-mail me, and if there are enough people, I’ll make a plan to get us all together.

Take that first step today and watch the debt melt away.

About the Author

Kelley Long

Kelley Long is a CPA/PFS and CFP® who believes that the true meaning of financial security means having choices in life. She uses her 15 years of experience in various financial services industry jobs to inform her work as a Resident Financial Planner for Financial Finesse, providing unbiased financial guidance through workplace financial wellness programs. She’s also a volunteer and media ambassador for Feed the Pig and 360 Degrees of Financial Literacy. In Kelley’s perfect world, everyone would feel great talking about their money concerns, fears, questions and problems, because then everyone would see that we ALL have those concerns, fears, questions and problems. Kelley lives in Chicago with her husband and their Himalayan cat Miles, where she also teaches BODYPUMP group fitness classes at the Chicago Athletic Clubs.