At the start of The Debt Movement, we introduced the topic of mental barriers that prevent us from paying off debt. Why? Because even the best-laid plans can fail and – when that happens – we’re left to wonder what to do about it. The fact is, good intentions and solid planning are important but they won’t move us forward without self-awareness. For the rest of The Debt Movement, we’re going to talk about each mental barrier that prevents us from paying off debt so they can be conquered once and for all. Remember, there’s a lot more to securing a solid financial future than simply crunching numbers in an Excel spreadsheet!
Mental Barrier Number Three: Doubting Your Chances of a Good Financial Future
Do you ever think you should pay off your debt but then say to yourself, “What’s the difference anyway, I’m never going to have money”? If this sounds like you, then you’re encountering the mental barrier of doubting your chances of a good financial future. It will be quite difficult to get out of debt if you don’t think you’re ever going to reach financial prosperity in the first place. So let’s talk about this feeling and what you can do to achieve a solid financial future!
Evaluate Your Financial Doubt
The first step in tackling this mental barrier is asking yourself why you feel this way. Is it because you’re living paycheck to paycheck? Is it because the future feels about a million years away? Or, do you think a solid financial future is only for people who earn a lot more than you? Be honest with yourself because this answer is the key to breaking through the barrier. And don’t feel guilty for feeling the way you do – these are all normal feelings!
Remove Your Financial Doubt
Now that you know why you doubt your financial potential, it’s time to figure out what to do about it. Let’s start with a few key points:
- Financial potential is not all about income
- Break the cycle of past financial choices
- It’s never too late to start building a financial future
You may have heard all of this before, but when applied correctly, adopting these methods can put you on the path to financial prosperity. So let’s not waste another moment!
1.) Financial Potential Is Not All About Income
Financial potential has more to do with what you do with your money than it does with how much money you have. Just like anything else, finances are about what you put into them. You could earn $100,000 a year and literally save nothing – or even have a lifestyle that costs you so much more than you earn that you go into debt. Meanwhile, someone who earns $35,000 per year may actually have a full retirement account and no debt. How does this work?
The key here is in your lifestyle. How much does your lifestyle cost in comparison to how much you earn? Figure this out by taking a piece of paper and drawing a line down the middle. Input your income in the first column. This is a list of all the ways you bring money in each month with a total at the bottom. The second column is your expenditure, in which you should list all the bills and things you spend money on each month, totaling that up as well. Now divide the two numbers and multiply that by 100. That number is the percentage of your income that is being spent. What’s your percentage?
The first way to increase your financial potential is to get that percentage as low as you possibly can. The next step is to write down a plan for saving whatever’s left. There are multiple ways you’ll want to apply this money including 1) debt payoff 2) emergency fund savings 3) retirement savings. Assign whatever money you have to save to each of these categories and determine how long it will take you to reach each of these goals. The road to a solid financial future may be closer than you thought!
2.) Break the Cycle of Past Financial Choices
Now that you have a true understanding of your financial situation, think about the past choices you’ve made. Some of the most common situations don’t feel like choices at all. In fact, financial distress usually comes as a byproduct of not making intentional choices.
Some examples of this are using a credit card in an emergency, taking out student loans because there was no other way to go to college, or just simply not monitoring your spending or making a savings plan. Whatever the case may be, now’s the time to break the cycle. Cut up the credit card, make a plan of attack for the student loans, start tracking your spending, and make a plan to save each month – a plan which you actually maintain and hold yourself accountable to.
3.) It’s Never Too Late to Start Building a Financial Future
Wherever you are in your life, wherever you are in your finances, now is absolutely the right time to start building your financial future! Remember, it’s not about how much you earn, it’s about how much you save. Of course it will be easier to put more into your savings account each month if you find ways to earn extra money. But, either way, what really matters is that you start saving what you can now. Bonus – saving can be addicting! As you watch your savings account grow you’ll likely feel motivated to find even more ways to save. And the more you learn about optimizing your savings and income, the better you’ll do. So save whatever you can and keep reading up on new methods to help!
I hope this helps you see why even you can prepare for a good financial future. I know that living paycheck to paycheck can be discouraging – but if you get creative – there are always ways to create a larger cushion between your income and your bills. So take that first step and realize that you don’t have to be a millionaire to be financially prosperous!
Stay tuned next week as we move on to mental barrier number four. And don’t forget to join The Debt Movement and help us reach the goal of paying off $10 million of debt in 90 days!