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9 Steps to a Major Money Makeover

July 28th, 2014 · No Comments · Your Money

by Kristy Welsh

(Last Updated On: February 26, 2018)

9 Steps to a Major Money MakeoverAs creatures of habit, it’s easy to get stuck in the same old thinking patterns and behaviors. This applies to all aspects of life – from the way we dress to the way we manage our relationships – and the same is true of our personal finances.

Isn’t it about time for a major money makeover?

1)      Record every penny you spend for 30 days.

It’s harder than it sounds, and for the very reason it needs to be done. Most of us spend more money than we think we do – a few dollars here, a few dollars there – adding up to a lot of transactions to keep track of over the course of a month.

That’s what makes it so worthwhile to see every penny accounted for, especially when you take the time to divide your spending into categories. This can be a real eye opener – particularly in the areas of food and entertainment – if you don’t already track your spending.

2)      Go on a spending fast for 30 days.

After 30 days of tracking your current spending habits, it’s time to put your aptitude for financial change to the test. Spend the next 30 days spending only on what is absolutely necessary. This means avoiding any extras at all, like eating out, going to the movies, buying clothes, etc.

If it’s not for housing, utilities, transportation, or regular household expenses, don’t spend it.

3)      Go through everything in your house.

Peter Lynch says, “Know what you own, and know why you own it.” Heed this advice and it will completely change the way you acquire and keep your stuff.

Start by going through your entire house and ridding out anything you don’t need or love. This can be an especially effective distraction during your 30-day spending fast. If you haven’t already discovered this, getting rid of stuff can feel just as good (if not better) than acquiring it. Plus, in digging into every nook and cranny of your home, you’re likely to find things you didn’t even know you had, so you may end up with “new” stuff anyway.

You likely have far more stuff than you realize, and seeing all the non-necessities bagged up for the thrift store or yard sale can prove an effective deterrent to thoughtlessly acquiring more in the future.

4)      Look for better deals.

This task goes further than just comparison shopping at the grocery store. Look for a better deal in every category of spending possible, including cable, internet, cell phone, car insurance, credit card interest rates, and anything else that comes to mind.

5)      Request free copies of your credit reports.

If it’s been more than a year since you’ve seen your credit reports, request the free copies to which you are entitled at AnnualCreditReport.com. Go over every items carefully noting any erroneous or negative listings. Then, if necessary, take steps to dispute listings with the credit bureaus.

"He looks the whole world in the face for he owes not any man." ~Henry Wadsworth Longfellow

6)      Write down your financial goals.

Do you need to pay down credit card debt? Build up an emergency fund? Start saving for a down payment on a house? Invest for your retirement years?

Whatever your goals, write them down, and do so in order of priority. Post the list where you’ll see it every day. You may even want to flesh it out into the form of a vision board – not only prettier to look at, but more powerful too.

7)      Rework your budget.

Now that you know how you spend your money, how capable you are of spending less, and what you want for your financial future, it’s time to revisit your budget (or create one for the first time, whichever the case may be).

8)      Read up on personal finance.

Whether it’s knowledge you need or inspiration, from blogs to books, there is a wealth of material out there to feed your financial soul. You’ll discover your own personal favorites along the way, but a couple of mine are Think and Grow Rich by Napoleon Hill and Rich Dad, Poor Dad by Robert Kiyosaki. You should also look for work from Suze Orman and Dave Ramsey.

9)      Repeat steps 1 through 8.

As with most things in life, your finances are never “done.” You’ll know more tomorrow than you do today – about what you want and the steps to get you there. So revisit steps 1 through 8 at least once a year to be sure your budget and behavior still line up with your goals.

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