Day 1: Face Your Finances Series
This post is part of the Face Your Finances series. You can achieve financial freedom sooner rather than later. You don’t have to settle for a life of debt, financial overwhelm, and living paycheck to paycheck. Don’t let your current financial situation make financial freedom feel impossible. It’s time to reclaim control and face your finances!
Today is all about taking a much needed financial inventory of your money.
Before you begin your hustle towards financial freedom, you need to first know exactly where you stand with money. That’s why today is all about taking an inventory of your finances, all the way down to the pennies.
The purpose of a financial inventory is to establish a foundation, or starting point, to financial freedom. It is pretty much impossible to establish a savings goal, a budget, or any repayment plans if you aren’t sure exactly how much money you make each month. That’s why you need to be aware of every dollar you bring in and every dollar you owe.
For some, a financial inventory might be really easy. For others, it could be one of the most difficult days in this 7-day series.
The reason this step can be difficult for some people is because looking at your finances means being 100% honest with yourself about your current financial situation.
Sometimes, you might not like what you see.
During your inventory, there is a chance that you will discover some aspects of your finances that are disappointing, shocking, or outright embarrassing. However, it’s important to remember that your honesty is what makes this financial inventory a vital step to your success.
Once you face the reality of your current financial state, you can start developing a plan that will lead you to financial freedom. Remember, this is helping you set your foundation.
With that said, today’s inventory will be divided into three categories:
- Monthly Income
- Monthly Bills
- Overall Debt
Let’s get started with your financial inventory!
1. Monthly Income
Simply put, your monthly income is how much net income you bring in during a single month. Net income, or in simpler words take-home pay, is the amount of money you make each month after all your deductions have been subtracted from your paycheck. If that’s still difficult to understand, just think of net income as the amount you’d get if you cashed your check.
Therefore, net income includes money from your full-time job, any part-time jobs, income from a side hustle, government-based checks, etc.
It is so important to be honest about the amount of money you actually make in a single month. If at times you are uncertain about how much you make in a month, don’t overshoot it. It helps to be on the conservative side.
For salary workers, it’s easier to calculate your monthly income because there is rarely any changes. For hourly workers, this is more of an educated guess. Make sure you’re as accurate and realistic as possible.
When you have this number, write it down in your phone or somewhere you won’t lose it.
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2. Monthly Bills
Here is where things start to get, well, less fun.
We all have them. We all hate them. But, we all have to face them.
Start by compiling a list of all your fixed monthly bills. Fixed monthly bills are those consistent bills that you expect to pay each and every month.
When listing all your bills, it’s vital to remember everything. To make this easier, check your online banking statements from the past few months to see exactly what reoccurring bills you have. If you aren’t on online banking, get on that! It is the best and most accurate way to keep track of every single purpose.
Here is a list of potential monthly bills:
- Car payment
- Car insurance
- Health insurance
- Child Support
It’s also good to add in additional monthly expenses that aren’t necessarily “bills”, but are guaranteed monthly costs. This includes:
- Pet food
Don’t worry about putting the amount you spend on your bills. We will tackle that tomorrow. Today all you need is the comprehensive list.
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3. Overall Debt
Debt. *rolls eyes*
You might want to ignore it, but you shouldn’t. The harsh reality is that almost everyone has some sort of debt. It’s become a standard or a norm to have debt. But, you need to face your debt, all of it.
It’s time to take a debt inventory so that you can develop a plan and start to tackle it. Here are the most common debts:
- Credit card(s)
- Car loans
- Student loans
- Medical bills
- Personal loans
Again, don’t worry about putting the amount you spend on your bills. We will tackle that tomorrow.
Start working on your financial inventory asap! It’s easier than you think.
Once you have completed your financial inventory, you will have a clear picture of what your monthly finances look like. This might not have been easy for you to do, but it will be eyeopening.
If you find that you are getting overwhelmed or frustrated, just keep pushing through it. Remember, this series is all about facing your finances so that you can start working towards financial freedom.
You got this!
Check out all 7 days of the Face Your Finances series:
Day 1: How to Do a Financial Inventory With Your Money
Day 2: How to Understand Your Spending in 3 Easy Habits
Day 3: How to Face Your Credit Card Debt in 5 Easy Steps
Day 4: How to Start a Budget You Actually Stick To
Day 5: How to Save Money Like a Pro
Day 6: 17 Way to Increase Your Income
Day 7: How to Take Control of Your Financial Future