Starting Over Financially: Your Complete Guide to Financial Freedom

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We live in a world where we often feel like we’re doing something wrong or that no one can relate to our problems, especially when it comes to our finances. We are constantly bombarded with people in our lives, or even worse, on social media, who show these extravagant outings, long-term luxury vacations, and designer hauls. I notice that people often begin to either desire these things or become envious. However, it sometimes motivates you to want to make some changes.

Sometimes, you slip and fall in life. You get behind on your bills, or maybe you start to carry a balance on your credit card. OR maybe you’re just tired of being that financially responsible person who pays bills on time but has NOTHING left to splurge, have fun, or just “ball out.” Then you look for answers, you decide to leave the past in the past, and today you tell yourself you’re starting over financially!

I, of all people, understand this. I’ve started over a bunch of times—different jobs, different businesses, lived in different locations worldwide. So when I tell you I can write the book, I can write the book. I’ve started over financially with a lot of money, I’ve started over with as low as $125, I’ve started over with debt and without debt. I promise you, ask me any question about any income and I can help. So believe me when I say, I am NOT judging you at any place you are in life. You can check my about page to learn more about me, but now that we’ve got that out of the way, let’s get to it!

Starting Over Financially

Step 1: Drop a Pin 📍Where Are You Today?

A wise person once said, “in order to get where you want to be, you have to know where you are.” (I don’t know if someone actually said that, but I say it all of the time. 😅) If I asked someone how long it takes to get to Japan, the first thing someone would ask me is, “where are you?” If you were asking Google, they would prompt you to give them permission to share your location.

If you said to me, “Marisa, I want to be a debt-free millionaire,” the first thing I’d ask you is:

• What debt do you have today?
• How much cash do you have today?
• What are your expenses and obligations?
• What is your income?
• How much do you have in investments?

Imagine the answers from different people:

Person #1:

• I have $500k in debt
• I have $25k between my checking and savings accounts
• I spend about $6,700 monthly on expenses
• I make about $8k
• And I have about $75k invested

vs.

Person #2:

• I have $7k in debt
• I have $1,400 on hand
• I spend $2,500 on expenses monthly
• I make about $4k per month
• And I have $0 invested

Now I have a picture to start with, now I can give them both advice on how to get to the next level, and that’s what I want you to do now. Start with our Net Worth Calculator (it will open in a new tab automatically, so that you can keep this article open.) Step one of starting over financially is knowing where you are today. Take your time and do the work. If you have to break out your bank accounts, old checking or savings accounts that you’ve forgotten about, maybe investment accounts, 401(k) logins, etc. Go through the calculator; there are examples that will help jog your brain.

Step 2: List Your Debt – Debt Snowball

Now this step is an extension of step one, but very distinctly different. You’re going to start by listing your debts from smallest to largest. I don’t want to overwhelm you, but you might want to also consider things like the amount you owe on your phone (if you didn’t buy it outright) or any personal loans from friends/family of any size ($5, $20, $1,000, $50,000—these count as well). I’m going to make it simple for you. We have a FREE Debt Snowball Worksheet to help you keep track of where you are today.

To give you the gist of the idea of a “debt snowball,” the concept is that you:

• Pay all the minimums on your debts
• ATTACK any extra money left over in the month after you pay your bills and minimums
• Throw it all at your smallest debt (while stopping all other things, like investing, saving, etc.)

This way, once you pay down the lowest debt, you can take all of the money that you would’ve paid toward that debt, loan, or credit card, and pay it toward the next debt. You will keep going until you are debt-free. No magic pill, just diligence. The satisfaction you will receive as you see the snowball of money accumulate to finally pay your higher and higher debts—you will be relieved and have an overwhelming sense of satisfaction. Trust me, I know! I’ve been there!

And once you are done, you now have those debt payments as freed-up cash to invest and have your money work more for you rather than your money working for others. Or shall I say interest income rather than interest expenses! You can save more, or take more vacations—the world is your oyster!

But if you are reading this and you’re already debt-free, CONGRATULATIONS, and keep it up. Go to the next step!

Step 3: Tracking Your Spending

This is where most people would JUMP straight to budgeting, and although I love budgeting, I’ve had YEARS AND YEARS AND YEARS of experience with this. If you are not a budgeter or you don’t stick to your budget, I implore you to do this instead when you are starting over financially: TRACK YOUR EXPENSES!

What this means is: DO NOT CREATE A RIGID BUDGET WHEN YOU DO NOT HAVE EXACT NUMBERS TO WORK WITH!

Over the years, I’ve learned that so many people budget this way and wonder why it never works. You say to yourself:

“I want to start over financially. Let me make a budget. Okay, I know how much I have to pay for rent, my phone bill, utilities, etc. (Then the somewhat easy one comes, gas.) Hmm, perhaps I can allot myself $100 per month on gas. (THEN THE HARDEST ONE, FOOD!) Hmm, I spend a lot on food, but I can spend $400 on food, that’s about $100 per week. I can buy groceries and pack lunch, etc.”

Nope, that is not the way! If you want to have longevity in your financial journey—real change that lasts—I stress that you don’t skip this part. You ONLY write down your spending for ONE MONTH! The catch is that you have to write down every cent that you spend or earn! Everything:

• Cash that you give away to a homeless person
• The dollar you give to your niece for the corner store
• The 15¢ you receive in interest from that high-yield savings account

I do not want you to make any rules for yourself. You don’t have to say, “I will not go out to eat anymore,” “I will not buy lunch at work anymore,” or “I will only thrift.” I want you to just track the normal person that you are. Write down the things that you buy that you enjoy, write down the responsibilities that you loathe, and the guilty pleasure spending that you don’t include in your past “budgets.” I want you to have a genuine, authentic picture of who you are because in the future, I want your budget to reflect you, not the idea of you. Authentic budgets are sustainable and enjoyable; they get you to your goals faster.

You can track this easily using:

• A pen and paper
• Creating a spreadsheet
• Our Money Brag Financial Tracker

Our Financial Tracker includes:

• A done-for-you spreadsheet that has space for you to begin TODAY!
• A PDF to give you more tips as you go along
• A chart where you will have a full picture of your spending for the month
• A place to keep track of recurring bills and expenses

I’ll give you quick insight: tracking alone will bring awareness, and the awareness and understanding are what bring authentic change. After a month of “living life as you wish,” but just writing everything down will shed light. You will say to yourself, “That is where my money goes? 😲 $1,105.86 eating out?!” You will be mindful moving forward, and that is what is desired for sustainability—mindfulness, not perfection.

Life will happen. You will have a dinner party that requires a big food budget (although, as we get to budgeting, I will encourage breaking down broad and general categories). You will find that you have more birthdays to attend in October (fyi, this phenomenon is those “Libra Babies” being a product of Valentine’s Day lovemaking lol 😅)

Step 4: Make Sure That Your Bottom Line Is Covered!

If you noticed, we got all the way to step four and we have not spent a dime—we’ve just prepared and set parameters in place! Now we have gotten to your monthly expenses. This step is important; your priority is always to maintain your life, your comfort, needs, and essentials. So let’s set the scene. Here I want you to take a real look at where you are. You may be on top of this part, and I commend you, but if you are not, DO NOT get frustrated.

What I’m talking about is:

• Are you current with all of your bills?
• Are you behind on any?
• Do you avoid paying bills that don’t report on your credit, like electricity bills?
• Are you allowing late payments to go on your credit because of car payments?

If you’ve already downloaded our Money Brag Financial Tracker, you will find within the bundle a PDF that helps you to make a list of your monthly expenses. I want you to take your time and even scour through your bank and credit card statements if possible. I want you to write down if you are behind on anything as well as your monthly payment.

Take this time to also assess if you are making enough to pay your bills, eat, and buy gas if necessary. This is a self-assessment. If the answer is yes, congratulations! And if you are in debt, take your time to ask yourself what the overspending is coming from.

The biggest mistake people make in this stage is not prioritizing their bottom line when they are starting over financially. The issue is that they will start paying toward their debt in excitement before seeing where they are or making sure they’re current. I implore you to just track your expenses first, get current with your bills first, and then see what you are left with. This amount is what you can throw at your debt. Even find ways to increase your income, whether you’re going to take extra hours temporarily or find a side hustle—we want to work to get you out of your debt and out of a very expensive cycle!

But if you are reading this and you’re current with your bills, CONGRATULATIONS, and keep it up. Go to the next step!

Step 5: Stop Credit Card Float

What is credit card float? Credit card float is when you are using your credit card to pay your monthly expenses and then you pay the balance, sometimes in full or sometimes a good amount of the balance, but you don’t have enough cash to sustain you for the following month. So you have to use your cards again the next month to keep you afloat or pay your way.

Most people do this thinking that they are being productive. I will say, in most cases you probably are avoiding interest, you feel awesome because you are getting points (usually 1-2% maybe 3-5% for promotions or special categories), but the issue is that with credit cards, credit card companies know that because it doesn’t feel like cash, you are likely to overspend.

If you had $100 cash, because it feels finite, you are likely to make financial decisions with mindfulness and strategy. Credit cards are made to feel like additional income, when they are not. You are more likely to swipe the card for:

• Meals that would be more of a splurge
• Maybe buy that bag when you pass by a boutique
• Maybe get that extra appetizer when you are courting a young lady

This is a trap.

This is how you know if you are in credit card float: If you paid off your credit cards in full right now and cut them up, would you be in trouble? Would you be in need of them again within the next 30-60 days? If you can’t pay your cards in full and cut them up, you are in credit card float. You are in a perpetual debt cycle, and frankly, 1-5% cash back isn’t worth the cycle, especially when you’re overspending.

What I urge you to do is do yourself a favor and stop the cycle cold turkey. 🤷🏾‍♀️ If you have to pay interest to get out of the cycle, know that it will be cheaper to do so than to continue using credit cards. I know it sounds cut-throat, but I implore you to find other ways to increase your income or cut expenses, even see what odd jobs you can do with skills that you have. We are making the decision to start over, so we have to make some rigid choices and not allow more slack to be given. Let’s do it!

Step 6: Emergency Fund

Now this step is JUST for starting over—there will be more specific content in future articles if you are not starting over financially. So when you are starting over financially, the rule of thumb that any sane financial professional would advise is $1,000. Get to save $1,000 as fast as you can and POUR the rest toward your debt. The idea is that if you have a steady income and you have your living expenses covered, putting aside $1,000 (even if it takes a few months) will cover anything that will help you to avoid going back to paying for things with debt.

Obviously, this varies depending on your level of income, but the understanding is that we want you to have some money or a good chunk for anything unforeseen. When we get to the budgeting steps, we will even be able to get rid of the misconception of what is considered an emergency, but for now, things like:

• A flat tire
• Forgotten expenses
• A baseball flying through your house window

But this is so straightforward and simple, and I want you to simply keep it in a savings account (and if you are a little more advanced, throw it in a high-yield savings account), but if you are a novice, don’t overthink it. A high-yield savings account is just an account with a “higher yield” or that pays you a higher interest rate than your regular savings accounts.

For example, at the moment I recommend SoFi High Yield Savings. It’s completely free, no minimum balances, and right now as of writing this, they offer 3.8% interest. If you sign up using my link, they are offering $25 just for opening the account and $300 for using direct deposit with them, so if you decide to open the account, this will luckily take care of a big chunk of that $1,000. But if that overwhelms you, don’t worry about it 🤷🏾‍♀️. To be honest, your priority is just getting through these steps and on track. But I will say, sometimes a fresh bank account helps with starting over financially.

Step 7: ENJOY THE PROCESS!

I can’t stress how overlooked this step can be! Keep in mind, there are countless adages pertaining to this! And I’m glad that you have gotten this far, which is a task in itself. Gaining information and knowledge to get to the next step financially is not any small feat, and now the next step is taking action TODAY!

But as you take action, remember you don’t have to get to perfection, you don’t have to be flawless in this adventure, but you have to be constantly committed to fixing mistakes and reaching your goals. Your goal is to get to:

• Clutter-free finances
• Debt-free status
• $1,000 emergency fund
• Stress-free living because you know where your money is going

Your awareness is what is important, your resilience and diligence are important. This is so much easier said than done, TRUST ME! But once you trust the process, experience the growth, and look back at the progress you made within just one month, let alone months, let alone a year and then several years, you’ll be amazed with yourself and how much you discounted the process. You will reflect on the struggles and the fight you had to endure and smile because it was worth it and the little things really did add up!

Resources Mentioned:

• Net Worth Calculator – What are you worth today? Your financial pinpoint 📍
• The Money Brag Financial Tracker – What story do your finances tell? What are your priorities? Track your authentic spending. ✍🏾
• Debt Snowball Worksheet – Let’s make a plan to get you out of debt! Plan your debt payoff with this strategy. 🤑
• SoFi Bank – High-Yield Bank, no minimums, no fees. 3.8% interest on your funds and offering up to $325 when you open this account!