This post is from new staff writer Sierra Black. Sierra has provided several great guest posts over the last few months, so I asked her to come aboard as a semi-regular staff writer. Good thing, too. I’m swamped with final book preparations, so my post for this morning wasn’t ready to go! Sierra writes about frugality, sustainable living, and getting her kids to eat kale at Childwild.com.
The most important trick to managing your finances — and maybe the hardest — is just getting started. My household finances were like an impenetrable jungle of budget formulas and investment accounts and bank policies and tax codes; not knowing where to start kept me broke and confused for years.
There are as many systems of thought for tackling spending as there are people managing their finances. Some people are avid fans of budgets while others swear they never work. Some will tell you to save up an emergency fund first while others zero in on debt reduction at all costs.
Finding a starting point can be a challenge. The trick is to begin where you are: Find something you’re already good at and apply it to your financial life.
To find your path through the financial forest, look for something that is:
- A small step. You’re not going to completely remake your financial life in one day. Choose something bite-sized that you can do with relatively little effort or expense.
- Self-contained. “Get out of debt” isn’t a first step to managing your money. Tracking your spending can be. Calculating your net worth might be. Reading a personal finance book or taking a community education class are good choices. Choose a single step that will help you work toward a larger goal.
- Comfortable. The skill you use to make the first step should be a familiar one. Now’s not the time to learn how to create an Excel spreadsheet or read a stock ticker. Start with what you already know.
- Pleasurable. Ideally, start with something you enjoy doing. You’re more likely to persist with your new financial strategy if you’re doing something you enjoy and are good at.
For me, the first useful step after years of false starts was joining a Your Money or Your Life study group. I’m a big nerd at heart. Sitting in a class taking notes on a textbook and doing homework was something I knew how to do well. Using those skills to do a class about managing my personal finances let me get a grip on the information in a way no other format had.
By starting with what I already knew, I was able to sidestep my fear about money. Those voices in my head that told me I wasn’t able to understand my finances and I’d never be any good at it fell silent when I put my “student brain” in gear. I basically tricked myself into learning how to manage my finances by focusing on a skill set I had long mastered: being a good student.
Learning new skills
Once you’ve started down the path and are making some progress, you’ll want to stretch and learn new skills. The new skills you’re reaching for should:
- Build on what you know and are doing well. Once you get into the flow of it, it will be easier to see what new skills you’ll need to learn. Then you can build on what you’re doing, instead of starting from scratch with a brand-new skillset.
- Apply directly to the work you’re doing. Don’t distract yourself learning to make that Excel spreadsheet if it’s not going to solve a problem for you. Stay on task and pick up the knowledge you need to reach your goals.
- Be steady and repeatable. At this stage of the game, do something small, slow and steady that you can keep doing over time. Focus your energy on the daily habits that will help you reach your goals. That kind of personal change is powerful stuff.
For me, the new skills that fostered personal change came at the end of the YMoYL group, when I was out on my own doing this stuff in the boring, workaday world. There was no teacher to show off for anymore. I just had to do it.
The new skill I picked up was the relatively basic one of tracking my finances. I’d tried it many times and floundered. This time it stuck, because I was building off of what I’d learned in the class. I started a cash notebook, using the same type of small pocket notebook I’d carried for years to jot down creative ideas.
Things started going pretty well for me, financially. My money was getting organized. I was saving more, spending less, and paying down our debts. So far so good. I wondered what else I could be doing with the new tricks I’d learned. Then things got really exciting.
Cross-training your skills
Once you’ve mastered your new money skills, you can apply them to other areas of your life. I was never able to keep a daily record of activities before I began tracking every cent that passed through my household. Now I know how to do it.
Since mastering that skill, I’ve used the same tracking system to keep a log of freelance writing submissions and contracts. That’s been a huge boon to my career. I’ve also used it to keep a food journal that helped me radically change my diet. I am now starting an exercise log using the same set of skills.
No matter what you want to change about your financial life, you already have some of the tools you’ll need to do it. This is true whether you’re staring down a mountain of debt or starting to pile up some investments.
Look around at your life now: What’s working well? What are you really good at? How can you apply that to the financial problems you’re trying to solve? Success breeds success: Beginning with what you know lets you start by succeeding, and makes it easier to continue doing so.