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.
Updated January 7, 2011 and originally published January 1, 2011.