This series explorers the concrete steps anyone can follow to take control of your finances. Many years ago, I felt like I was a victim of circumstances. Bad things, like job losses, apartment losses, and debt — even my girlfriend leaving me — were other people’s fault, a result of the world around me. I came to realize after self-reflection that I had the ability to control these outcomes. I applied the theory of control to my personal finances. I was able to dig myself out of debt, and now I’m doing quite well financially.

Here are the keys. Click on each of the links below to learn more.

Part 1-A: Become aware. Compare this to the scene in The Matrix where Neo sees the world around him for what it is. Every journey starts at an awakening.

Part 1-B: Take an inventory. You can’t determine where you are going without knowing where you’ve been and where you are.

Part 1-C: Make accurate predictions. With an inventory in hand, you only have part of the story. Your income and expenses are key to determining your future.

Part 1-D: Decide to take action. Although you can see what the future might look like, events are not fixed. You can change your path if you don’t like what you see.

Part 2: Track your money. All you need to get on the right path is a pencil and paper — but these tools will help, too. Tracking your finances closely immerses you to build a better understanding.

Part 3: Spend less than you earn. This is the basic financial principle that, if followed, will help you prosper, and if ignored, will send you into a spiral of debt.

Part 4: Use high-yield savings accounts. Everyone needs to keep some cash on hand, so why not make that cash earn as much as possible while still being available to you?

Part 5: Build a better budget. Budgeting is the third rail of money management — no one wants to touch it, but it provides the power to move you from one station to the next.

Part 6: Get out of debt. There are many methods to eliminate your debt obligations, but whatever you do, just pay it off. Debt leaves you beholden to other individuals, and everyone has the right to be free.

Part 7: Set goals. Do you have a personal mission statement? If not, then what’s the point of growing your net worth? Set long-term goals so your short-term goals make sense.

Part 8: Set savings targets. The point of accumulating money isn’t the accumulation of money, its what you want to do with it. With real goals in mind, you can make relevant and accurate short-term targets.

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This article is presented by Kelly Whalen, Consumerism Commentary staff writer, who hosts a weekly internet show called the ¢entsible show.

Unexpected income is a problem many people would love to have, but it happens more frequently than people realize. Whether it’s a $20 birthday check from your eighty-something grandmother or a raise, there are few months we don’t have something unexpected.

When you get a windfall you could dream up many ways to spend or save it, so it is important to have a plan.

One-time income

You may find yourself with one-time income when your receive rebate checks, tax refunds, or birthday money, or if you sell something you own. Unless you are like Ebenezer Scrooge you’ll probably have the urge to spend some of this extra cash. The best way to deal with extra cash is to prioritize.

If your windfall is under $50, it’s a good idea to use this as fun money. $50 doesn’t go very far when you try to split it up, and unless you are $50 away from a savings goal or debt repayment, it will be pretty painful to put it away.

If your windfall is over $50 but under $100, put it towards debt. If you don’t have any debt use this as a little boost to your savings goals. If you have a favorite indulgence under $5, perhaps a hazelnut latte or a particular gum, spend a little on that so you don’t feel completely deprived.

If your windfall is over $100, plan to split it between spending and savings (or paying off debt). A good rule of thumb is to use a 50/50 split, though in some houses, like mine, that may be a 50/25/25 split.

If your windfall is over $1,000, I would highly recommend using it to (in this order):

• Pay off high interest debt.
• Boost your emergency fund.
• Save for a long term goal such as saving for a home.

Regular unexpected income

Whether your side business suddenly takes off or you get a raise from your job, careful planning will keep you from lifestyle inflation. Lifestyle inflation is an increase in cost of living corresponding to an increase in salary. No matter how much extra income you earn, you need to have priorities.

If you are in debt, paying off your debt should be your first goal. Do whatever you can to make that happen as quickly as possible. The easiest way to pay off debt is to have your money automatically deducted from your checking account the day after your paycheck arrives.

If you are out of debt, or have a comfortable amount of debt (many people consider a mortgage comfortable debt), you should consider saving all of your dough. It’s unlikely you will miss your hard-earned cash, because you are already accustomed to living within your means. Choose your own order of savings, but I highly recommend using the following order:

• 401(k) to the maximum employer match
• Emergency savings
• Roth IRA
• Traditional IRA
• 401(k) to the full maximum
• Long term savings

If you are already doing all of the above, you should consider using your leftover money to fund other investments.

If you are out of debt, maxing out all your retirement options, funding your children (or future children’s) college investments, and have a healthy savings account, you should consider any other income that isn’t accounted for your do-as-you-wish money.

How do you deal with unexpected raises or revenue? What do you do when you get an extra $100?

Photo: ervega

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