Getting control of finances with Dr. Lynn Richardson

With inflation taking a bite out of budgets, it's a good time to be more strategic about spending. Financial advisor Dr. Lynn Richardson shares some practical ways to get the finances under control.

The first step is creating a budget. Richardson recommends the 10-10-30-50 rule which covers giving, saving, incidentals, and bills.

The first 10 % of every dollar you get, you give. It may be hard to start the giving practice when funds are limited, but Richardson says giving is a sign of gratitude, "and gratitude elevates your attitude," she said.

For the next 10%, save, put aside whatever you can, and don't touch it.  Emergencies always come up.

The next 30% is for incidentals and should be in the form of cash or a separate debit card. This covers groceries, gas, hair, and nails. "Keeping it separate keeps us from having a spending addiction, which is what you have when you go to the grocery store for toothpaste and walk out with $179.47 worth of stuff you don't need," said Richardson.

And the remaining 50% stays in your checking account to pay bills. If you have more than enough money, start paying down debt. If you don't have enough money, you must start the process of elimination but don't take it from your giving, saving, or the 30%.

And what expenses can be cut? "So I want everyone to act like they've lost an income, even if you haven't. When prices are increasing and we can't control the economy, we can control ourselves," said Richardson. Canceling subscriptions, especially the ones you may not even know you have, is helpful as well as cutting the extra spending on things like coffee, hair, and nails will help. 

"Talk to your creditors. Now is the time to say, hey, I'm having a little bit of difficulty," said Richardson.

Living below one's means is also key. This could mean moving back home or getting a roommate. Don't forget about coupon cutting and looking for sales.

With all the restrictions, could there be any room to splurge? Richardson says yes. "You can splurge anytime, as long as it fits in the 30%," she said. It's about strategic planning, looking at what you really want to buy, or a vacation you want to take and then decide how to allocate the funds to cover that splurge.