Welcome to the first edition of Monthly Money Makeover, a series proudly presented by National Debt Relief Financial Wellness board member Dasha Kennedy. We’re excited to bring you a new chapter in this journey each month, offering simple and effective strategies to reshape different parts of your finances. The idea is simple, yet powerful: tackle one aspect of your financial life each month over the year, starting this January.
January: Budgeting Basics
Identify All Income Sources
Your financial makeover begins with a thorough understanding of your income. Document every source of income you have – this would usually look like your regular paycheck, freelance earnings and side hustles. Knowing the full scope of your income is important to manage your finances effectively.
Track All Expenses
For the next month, keep a detailed record of all your expenses. This includes your essential expenses like housing, transportation and utilities, and your non-essential spending, such as dining out and hobbies. There are no right or wrong expenses here because the goal is to gain a complete and transparent picture of where your money goes.
After compiling your expenses, categorize them. Common categories include groceries, entertainment, utilities and more. This step is key in understanding your spending patterns and identifying areas where you can save money. For example, your monthly food budget may be $400, but you find that $150 is spent on dining out, suggesting an opportunity to reduce expenses by cooking more meals at home.
Evaluate Income Versus Expenses
It’s time to compare your income against your expenses. If your expenses exceed your income, it’s time to identify and reduce non-essential spending or use this as an opportunity to increase your income. If your income exceeds your expenses, strategize on how to utilize your leftover money best, whether it’s for savings, investments or paying off debts.
Conduct a Debt Assessment
List all your debts and formulate a realistic repayment plan. We’ll dive deeper into debt management and repayment later in the series, but for now, feel free to visit our website for any questions. Knowing exactly what you owe is the first step in effectively managing and eventually overcoming debt.
Set Clear Savings Goals
Define specific savings goals, whether for an emergency fund, vacation or retirement. Having clear goals can motivate you to stick to your financial plan. It also gives you an idea of how long you need to put money towards each goal to plan for that money once you’ve hit your goal.
Choose an Appropriate Budgeting Method
Dasha Kennedy recommends zero-based budgeting, a method where your income equals your expenses, assigning every dollar a purpose. This approach makes sure that every dollar you earn is efficiently allocated to either expenses, savings, debt repayment or any category that you choose.
Continuously Adjust and Improve
Your financial situation is always changing and so will your budget. Regularly review and adjust your budget to reflect any changes in your income or expenses. Stay tuned for next month’s edition of Monthly Money Makeover, where we will discuss another critical aspect of personal finance. Together, we can make this year transformative for your financial health, one month at a time.
About the Author:
Dasha Kennedy is a fearless financial activist and visionary behind the powerful platform “The Broke Black Girl.” Driven by her own experiences, she champions financial empowerment for marginalized communities, especially focusing on black women. Through her insightful and impactful content she equips individuals with the tools to overcome financial hardships and build a secure future.
Dasha’s message resonates with thousands, inspiring them to take control of their finances and break free from the cycle of debt. Her mission goes beyond just providing financial advice; she aims to dismantle systemic barriers and create a more equitable financial landscape for all.
As a dynamic voice in the finance world, Dasha’s work has garnered widespread recognition and acclaim. Her advocacy for financial literacy and economic justice has resulted in tangible changes in the lives of countless individuals. Join her on this empowering journey to transform lives, one step at a time.