Trying to Gain Financial Control? Start with Any One of These 4 Straightforward Steps

You can gain financial control, but if you are worried about your financial situation, you are far from alone. According to a survey released by the Federal Reserve Board, 47% of American consumers report that they would not be able to come up with $400 for an emergency without borrowing or selling something. That’s half of the country living in a continual state of financial peril.

If we can not come up with $400, that means we are probably not saving for retirement and are in a somewhat precarious financial position – no matter how much income you have each month.

Do Not Feel Guilty: It is Not Your Fault

While some of us overspend on fancy houses, vacations, luxury vehicles, and lattes, many people owe their plight to a series of unfortunate events coupled with incomes that are just short of covering their daily living expenses.

When you’re already barely making ends meet, something like a trip to the ER or an unexpected car repair can tip you into the red at a moment’s notice and foil your good intentions of putting money into an IRA, 401(k), or other retirement account. If we can not pay for life’s everyday disasters, then we are going to have a really hard time saving and paying for retirement. Social Security probably won’t cover your expenses. You need to figure out how to prepare for your golden years.

Blaming the stock market, the housing crisis, the job market, the student loan crisis, or one of a million other powers beyond our control won’t do anything to solve the issue.

Worry about money can be overwhelming, but you can gain financial control with 4 straightforward steps.

1. Start Gaining Control by Building an Emergency Fund

The first step to gaining financial control is amassing an emergency fund. An emergency fund enables you to avoid falling deeper into a financial hole when the unexpected happens. (And, the only thing that you can anticipate is that the unexpected will always happen.)

In his book “Total Money Makeover,” personal finance guru Dave Ramsey recommends saving $1,000 as the first step toward making over your finances. I know what you’re thinking: if I can’t come up with $400, how am I going to save $1,000? The answer is: do whatever it takes. Sell some stuff on Craigslist, do odd jobs, call your cable company to negotiate a lower bill, and put your monthly savings toward your emergency fund.

Creating the emergency fund won’t happen overnight, but with some hard work and ingenuity, you can make it happen.

1. You might want to start by setting a deadline and brainstorm ideas for amassing the money.
2. Then, set up a separate bank account for the emergency fund – maybe even open an account at another bank so it won’t be too tempting to dip into it.
3. Finally, once you have the $1,000 saved, keep in mind what actually constitutes an emergency. An emergency is not a really good sale on new patio furniture or a vacation.

Your emergency fund is for those times when you get a hole in your tire or an unexpected bill. It’s an insurance policy against having to whip out a credit card in a pinch. Don’t touch it unless you absolutely must. If you use some of the money, then go back to hardcore saving again until you can replenish the emergency balance.

You may find that once you learn how to save money in an emergency fund, you will feel more in control and able to start saving for retirement. Want more inspiration about how to save money? Dave Ramsey offers saving advice and tells you how much you will need to retire comfortably.

2. Evaluate Your Budget Every Month and Cut Expenses

If you want financial control, you have got to know how much you are spending and on what.

You probably have too many competing financial obligations. A lot of what you are spending is perfectly legitimate and worthwhile spending. However, if you have been working for even a few years and have gotten a raise during that time, you probably have room to economize and save more for the future.

It’s called lifestyle creep. When you were younger, you probably made less money and were able to make ends meet and live on less. As your earnings increased over the years, so did your expenses. Perhaps without even realizing it, we start incorporating little treats into our daily routine. A Netflix subscription, more lunches out, a membership at a fancier gym, magazine subscriptions, or hiring someone to take care of the yard work for you. These little indulgences add up and before we know it, we’re living paycheck to paycheck and missing out on some big opportunities to save.

Look at your bank and credit card statements and take a look at where your money goes each month. Call your cell phone carrier and cable company to negotiate lower plans. Cancel any subscriptions you aren’t using. Start eating at home instead of going out to dinner when you have a refrigerator full of food but don’t feel like cooking.

Turn lifestyle creep on its head by incrementally increasing your savings instead of your spending. Increase your 401(k) contribution by 1% and set up automatic transfers to your savings account. Then set a calendar reminder to do it again in six months.

3. Get Out of Debt

If a large number of middle-class Americans are struggling financially, credit cards are a big part of that problem. Only about 35% of credit card users are convenience users who pay off their balance every month and just use credit cards to generate bonus points and rewards, not because they need to borrow.

For the rest, the situation is pretty bleak. Overall, the national average card debt among cardholders with unpaid balances in December 2022 was $7,279. That includes debt from bank cards and retail credit cards.

Before you blame those numbers on irresponsible young consumers, the stats also show that millennials and individuals over the age of 74 had the least credit card debt. The biggest spenders are Gen X. Credit card debt has become a national epidemic with Americans paying so much in fees and penalties that we may never dig ourselves out.

If you really want to gain financial control, it’s time to get serious about paying off credit cards. Stop using credit cards as an extra source of income when you want to buy something you can’t afford. Two effective methods of paying down debt are the debt snowball and the debt avalanche. Pick the one that appeals to you and get started.

4. Gain Financial Control by Learning to Say No

In his piece for The Atlantic, The Secret Shame of Middle-Class Americans, author Neal Gabler details the series of financial missteps and misfortune that led him to be included in the half of Americans who could not come up with $400 in an emergency.

Falling pay scales in journalism, bad luck in real estate, and being sued for the return of a book advance factor prominently. But one decision he made was clearly within his control. He briefly mentions having no retirement savings because he emptied his 401(k) to pay for his youngest daughter’s wedding.

What happened to saying no? Motivational speakers encourage us to say “yes” to life. Take a risk, pursue your dreams, meet new people. But “yes” doesn’t always work out, especially when it means sacrificing our financial futures.

If you want to know how to save money, just say no to things that cost too much. You don’t have to say no to everything, but you can not say yes to everything. Learn to prioritize and make hard choices.

Every parent wants to give their kids the best of everything, but there comes a time when saying no is the only sane choice. No, I cannot cosign on a loan. No, I cannot pay for four years of college at an elite university. No, I cannot foot the bill for the wedding of your dreams.

Whether it’s our kids or anyone else doing the asking, if saying “yes” means sacrificing your financial stability or retirement savings, the answer needs to be no.

Save Money and You Might Eliminate a Big Source of Stress

For many Americans, living in financial peril is a major source of stress. If you find yourself included in part of the 47%, start taking small, sustainable steps to take control of your finances. The monetary benefits of dealing with the problem will improve not just your bottom line, but your mood as well.

Need more ideas for how to save money? Here are tricks and tips for saving more.