Financially Healthy Habits

One of the quickest ways to become a miserable person is to ignore advice to keep an eye on your finances, to refuse to spend a few minutes each month reviewing your income and expenses for evaluating your version of a budget, and to spend more than you can afford to pay each month. Tracking and budgeting are the two means of assessing your financial situation and beginning to remedy financial problems. Plenty of people more qualified than I am have written entire books and courses on this subject, so I won't reinvent the wheel, but give you the mashup that seems to have formed in my mind after reading so many of their books and listening to several of them talk through their methods.

First step in becoming financially stable is always to figure out how much you're bringing in after taxes each month vs. how much you're spending each month.
Second step is to figure out which expenses are mandatory, so you can minimize if not eliminate unnecessary expenses for a while.
Third step is to trim the excess from any mandatory expenses that can be reduced (Dave Ramsey's favorite cut is to trade down if your car is on a payment plan).
Fourth is to set up a savings account of about one thousand dollars to act as an emergency safety net.
Fifth is to pay the minimum due on all other debts while paying as much as possible each month to pay off one debt entirely (either the smallest balance, or the highest interest rate).
Sixth step is to keep the eliminated debt account zeroed out, pay the minimum amount due on all but one other debt that will then be targeted for elimination by the largest payment you can scrape together each month without touching your emergency fund. Continue repeating step six until you no longer have any rolling balance on any credit cards, have eliminated any car payments, and have paid off any personal and payday loans. When your only remaining debts are possibly student loans and mortgage, you're ready for...
Step Seven, increasing your emergency fund to cover at least three months of all household expenses.
Step eight is pay off the remaining debt(s) with the same targeted aggression as before.
Step nine is to ramp up your emergency fund so it can cover six months of the entire household's expenses.
Step ten is to maintain your financial stability by keeping debts away; save up to buy rather than using credit, refill your emergency fund as needed (double it if you want), aim for quality over quantity, save and invest for retirement, and repair things when possible rather than replacing everything that gets slightly damaged.

Oh, plus, if you find that your income is not sufficient to cover your absolutely necessary expenses while fiercely paying down your debts, then you need to increase your income. If you only have a part time job, figure out how to add more hours with your existing work, and/or get a second job. If you already work a full time job, but your spending has outpaced your pay increases, check on the possibility of a raise, or pick up a part time job that will take a few hours two or three days each week when you would otherwise be off work.

If you're working as much as you possibly can and your spending is still exceeding your income, you have a big problem and need to reevaluate your priorities immediately. Stop buying things, stop going out for drinks and meals, stop every expense that is not necessary to keep you alive and just see how long you can go without buying anything new aside from fuel to carry you between work and home, and food to cook at home as needed. While you're seeing how long you can go without buying anything but the bare minimum requirement of weekly gas and groceries, pay off your short term loans and credit cards either from smallest to biggest balance, or from highest to lowest interest rate. When you have half of your credit cards paid off, then you might be ready to set up a savings account and load it with enough to cover one month of all mandatory expenses before getting back to slaughtering your remaining consumer debts.

Wherever you are on the road to financial stability, I hope you're headed in the right direction after reading this. And when you're a step or two closer to full stability, come back for another ingredient to help build even more resilience for a happier, more prosperous future.