As a teacher, August has always felt like a really long Sunday for me. We spend half of the month preparing for the new school year, anticipating the return of old faces and preparing to meet the new faces. 

But before we know it, we’ll have kicked off back to school, and it’ll be game on for what will be a few fast and furious months before the end of 2021. 

With half of the year being over, it makes for a good time to slow down and think about how far you’ve come this year. 

Are you on track to achieve what you set out to do?

If you aren’t, first, remember that you’re normal. But remember that you still have time to make progress this year. And even though as a teacher my summer months are calmer, as Jenna Yee says, it’s the schedule where I’m teaching that I spend the majority of my year. 

If you’re hoping to make progress with your finances this year, it may be worth it to take a step back, see where you are, and check in again with where you’re wanting to go. 

Today, I’m bringing 4 steps to achieving financial mastery. None of these steps are easy, but it’s important to reorient yourself if you feel like you’ve lost your way.

Recommit to those goals you have today so that you feel great by the time January 1st rolls around.

Clarify Your Dream

Just like building a strong foundation for your house, this first step is meant to build a strong foundation for your finances.

Your first stop is to clarify your dream. If you don’t have a reason for controlling your finances, you probably won’t ever make any progress.

This is especially true if you’re the money nerd but have been struggled to get a spouse on board with better money habits. There has to be a reason to control your spending. There has to be a reason to delay spending money you have now for the future.

You probably already have a reason. You probably already have goals. 

Keep those visible. Write them down where you can review them regularly. Post a picture that represents your goals on your phone background. Whatever it takes to keep those goals in your mind.

Create Margin

Once you know why gaining control over your money is important, then you can move on to how you’re going to do it. And the thing that’s crucial to understand here is the money equation.

The money equation says that income-expenses=margin.

There’s two levers that you can control, your income and your expenses. The result is the amount of money you have left over, your margin. It’s crucial for your finances, especially if you’re trying to make progress on debt, that you make your margin as big as possible.

Of course, what we’d all love is to make our income as big as we can. You’ll first want to work to earn more through a career you love, but you may also want to temporarily make your margin bigger by picking up another job if you feel like your current income isn’t going to help you make the sort of progress you want.

Aside from a temporary boost, creating a bigger income is a long game. You’ll keep working to gain promotions at work, but it’s not something that will happen overnight.

That’s why controlling your expenses based on the income you have today is crucial.

No matter how much you earn, you want to spend not only within your means but with enough room to make financial progress.

Here’s what you’ll need to do to make progress in this step.

1. Pick a budgeting software to start tracking your spending. (You can always switch later, but my preference is YNAB).
2. Switch gears from simply knowing where your money went to deciding where it’s going to go. Be intentional with your dollars so that you can maximize the potential with the money you have today.
3. Your margin is where you’ll be able to make progress with your finances. Use your budget to trim your expenses so that you’re making the kind of progress you want on things that really matter to you.

Save For The Future

So you’re on a budget, now it’s time to make sure that we don’t spend every dollar that goes into our bank account this month.

When it comes to saving, there’s several different buckets that you’ll want to be saving for.

• First, step away from the financial edge by giving yourself a greater buffer or emergency fund. Start small. Knowing that you have extra cash will completely change your life compared to barely making it paycheck to paycheck.
• Save for things you know are coming up. Break Christmas down into a little bit saved every month. Save ahead for car or house repairs that you know are coming up. This way, you’re not getting punched in the gut every time something comes up.
• Save up for the things in life that really matter. Saving in this bucket is probably where a lot of the things you want to experience or have reside. It’s so important that we don’t let the month to month get in the way of your long term aspirations.
• Lastly, make sure that you are saving for your future by investing in retirement accounts. The sooner you start this, the better. And it doesn’t have to be intimidating or complicated. In fact, to get started, just start investing into a fund like the Vanguard Target date retirement fund that corresponds to the year you want to retire. Don’t forget to invest in that fund inside a retirement account like your work’s 401k or a Roth IRA that you set up yourself. 

Never Take On Debt Again

My last step will encourage you to never take on debt again. It doesn’t really matter if it’s considered good debt or bad debt, you want to reach a point where you don’t have any of it. Right now, it may feel like there’s no way you could operate your life without some sort of debt, but it’s totally possible. 

The problem with debt is that the more you owe, the more of your money that you earn today is immediately eaten up by a decision you made in the past.

Remember when I said that we want to make our margin as big as possible? That’s really hard to do if you have a ton of payments. 

You may want to take it once step at a time when it comes to debt. 

1. Get rid of high interest rate credit card debt and then stick to a budget that allows plenty of room for margin so you never get hooked again.
2. Get rid of those student loans and other loans as soon as you can. Even though these might not be high interest, the sooner you can be free of them the better and the only way to do that is to pile as much money as you can towards paying them off.
3. You probably have a car loan, and it may never feel like you could operate without one, but it’s really possible. Hold on to your car longer as you get it paid off and then start saving in advance to pay cash for your new one. You may not be here today, but remember that this is where you want to work towards. I’ve had car payments and I’ve had vehicles that were both paid off. I can tell you that not having the car payment is completely worth it.
4. Lastly, you want to reach a point where you aren’t paying any more towards your mortgage. Most people will have a mortgage for their first home(although it’s not required). What would be great is getting your mortgage paid off and then saving for any future house moves before they happen.

All You Have Is Cash

The result of taking these steps is that all you have is cash and savings. And then it perpetually keeps building so that you have more and more.

It may seem crazy to think that you can arrive at this spot, but it’s possible.

The key piece here is margin. Working to make your expenses lower while also working to earn more through a career you love. Build your margin higher to achieve your dreams faster.

So where do you fall here? What dream do you have for your money? And which of these steps do you feel like is the next step for you?