No one wants to say they are losing control of anything, but especially not their finances. But what is the losing control of finances meaning?
“Losing control of your finances” means you have stopped directing your money where it should go and stopped paying attention to how much you have in your bank account. When you have no control over accounts blindly and choosing to deal with the repercussions at a future date.
This could look like using your debit or credit card without knowing how much is in your account, stopping paying attention to your bank and debt accounts, and living paycheck-to-paycheck because you overspend.
Losing control of your finances can feel like a spiral out of control and fearful of coming to terms to how much money you actually have in the bank (savings or otherwise) or how much you owe in debt.
Just because you have lost control of your finances does not mean you are not able to get the control back!
There is a pretty clear step in the right direction to gaining control of your finances. That step lays the foundation for taking control of every aspect of your finances: debt payoff, retirement savings, and overall financial freedom.
How do you get control of your finances?
When you decide it’s time to get control of your finances, it can be tough to know where to start. What is the first step in getting control of your finances? Because doing too much at once can only lead to burnout, you’ll need to get this first step right to be in the driver’s seat.
The first and most important step to gaining control of your finances is to start a budget. By creating a budget, you start to create a plan for your money and where it goes. Once you have that plan for your money, it becomes easy to allocate your funds to where it’s needed most.
In some cases, that means paying off your debts so you are no longer paying compounded interest. In other cases, that means you can pour money into a savings account for retirement. And along the way, it also means that you are able to more confidently save up for vacations, big purchases, and anything else that would make your life better.
It is entirely possible that, if you feel like you have lost control of your finances, starting a budget sounds overwhelming.
You are not alone in feeling that.
We felt the same way when first starting our budget. We tried and failed with different budgeting methods until we found the one that was right for us. That might be you too! And that’s okay.
It’s important to remember the feeling you had when you felt out of control with your finances. How scary it was to open your bank account. Use those feelings to keep you going when you’re starting out with your budget.
- 35 Financial Tools You Need To Manage Your Money Right
- 11 Best Budget Binders You Need to Rock Your Finances in 2021
Why is it important to control your finances?
Controlling your finances is one of the most important actions you can do for your life. Having complete control over where your money goes sets you up for the financial freedom that many people hope to achieve, but unfortunately never do.
It is important to control your finances now because you are delaying the inevitable. If your debt is ignored, it will only grow (even if it is through accrued interest). If your lack of retirement savings is ignored, you are losing time to save up for your retirement goals.
Getting control of your finances now enables you to create the future you desire for yourself sooner. Many people desire financial freedom, especially when they hit their retirement years. By gaining control of your finances, you are able to pay less to accrued interest over time and take full advantage of 401K and IRA returns.
Let’s take a look at how long and what you’ll need to save up $1 million by the time you retire. We will call retirement age 67, and I’ll be using this calculator from NerdWallet and this average salary by age chart. We’re assuming you are starting with no money in savings.
|Age when you start||Salary||Save per month|
As you can see, the amount you would need to save per month increases dramatically in just 15 years!
This is why it is so important to gain control of your finances as soon as possible. By getting control now, you are having to save less per month to reach your retirement goals.
What does being in control of your money mean to you?
When you’re in control of your money, the fear of the unknown is removed from the equation. It’s not just about budgeting (although that’s a big part of it), it’s also about your debts, savings, and what you’re doing with your money.
Being in control of your money means that you tell every penny of your income where it needs to go. When you are controlling where your money goes, there is no fear of the unknown because you have your finger on the pulse of your finances. You control if your money is saved or pays down debt. You control if money is allocated to restaurant funds or is saved up for a new couch.
Not only that, but you are also in control of your debts. You understand how much debt you have, where it is owed, and are able to formulate a plan to pay that debt off.
Control over your finances covers all aspects of your money: from money owed to money saved up and everything in between.
Imagine how much easier it would be to open your bank account when you have an idea of what’s in there (and not being unpleasantly surprised to see much less)? Or having a good idea of exactly how much debt you’re in and a game plan to pay it off?
That’d feel like a huge weight was lifted off your shoulders, wouldn’t it? It would take a lot of the fear out of the question so you are able to think more clearly about your finances.