You might be less than thrilled about your present financial situation.  There is a lot of that going around these days. But trouble yourself no more because I have some sweet news for you.  You don’t have to be a prisoner of your financial history.  Of course there is no magic wand that can transform your financial life overnight.  It will take work. But you can turn your situation around.  And much faster than you might think.  Let’s get to work.

Are you paying through the nose for credit card debt?

The first step towards you brighter future begins with using every dollar efficiently.  And paying big bucks for credit card debt is wasteful and in most cases unnecessary.

You might not be able to extinguish your debt immediately but you can slash your cost of debt fast.  You do this by refinancing either by using lower cost cards or by approaching friends and family for loans.  Another option that lots of people are jumping on these days is to use peer to peer lending.   However you do it, shrink your cost of debt and plow those saved dollars back toward retiring that debt fast.

Once you’ve reduced your cost of debt, you are ready for the next step — liberate yourself from your liabilities by paying them off.  How?  There are lots of ways to do this but the easiest and most effective method is to budget your spending.   Some people resist this step because it feels like a step back and an admission of failure.  Nothing could be further from the truth.  When you start budgeting and comparing your actual spending to your planned spending you gain a sense of control that other people — no matter how wealthy they are — can only dream of having.

Do you need to earn more than you currently do?

The solution to this problem is simple — but not easy.  And before you do anything you are going to have to be brutally honest with yourself.

• Why are you under-earning?
• Is this a question of your work ethic or will a little more training do the trick?
• Do other people in your industry earn more?  How are they different from you? What do they have that you lack?  Is it something you can obtain?  How?
• Are you in a dead-end industry?  Is it time to change careers?

The common theme to fix the under-earning problem is to be very clear about the problem before you go out searching for a solution.  People who make this mistake often exacerbate the problem by jumping from one stinky job to another without ever really understanding the problem they are trying to fix.  They are kidding themselves and wasting time.  Don’t fall into that trap.

Do you feel unprepared for the future?

You might still feel queasy about your finances even if you are earning up to your potential and are out of debt.  That happens to people who have no plan.  Such people:

1. Don’t know how much money they should be saving.
2. Don’t know if they have the right investment mix or strategy.
3. Aren’t sure if they have the right kind of life insurance or the right amount.

As a result they:

1. Don’t save as much as they could and thereby reduce the financial freedom they otherwise might enjoy.
2. End up with poor investment results and often fail to reach their financial objectives.
3. Expose their families to catastrophic risk.

The solution to this problem is to create a plan.  You can do much of this yourself or you can hire an advisor to do this for you.   But if you do decide to hire a planner, my suggestion is that your tread carefully.  Many people who call themselves financial planners are just stock brokers and/or insurance agents trying to make a sale.   Ask lots of questions.  Get many references.  If you have a bad feeling, trust your gut and walk away.

Even if you do hire a planner, the encounter shouldn’t be all that expensive.  If it costs more than $500 to $750 you might be talking to the wrong person.

Creating a new and good financial life isn’t rocket science.  It takes a little understanding and some work.  It also may involve you moving out of your comfort zone.  You may have to do things differently than you have done before.  That being said, the rewards of having a life free of financial worry is well worth it.

What are you waiting for?

Photo by stuartpilbrow.