Simple Steps You Can Take Right Now to Get Your Finances in Check
An astounding 45% of Americans are living paycheck to paycheck.
Taking control of your finances doesn’t have to be mind-numbing drudgery. Indeed, it can actually be a very empowering and wonderful experience. While it takes a little time to set up, once you start tracking your spending you’ll know without a doubt where you stand and you’ll have the tools you need to keep your financial world on track.
Earnings & Affiliate Disclaimer
Many people want to bury their heads in the sand and hope that everything will just work out while they continue to live paycheck to paycheck. But I’m here to tell you that that kind of thinking isn’t going to pay off very well when you’re sneaking up on retirement and your retirement fund is looking, shall we say, meager.
Then there are those who believe wholeheartedly that they have a pretty good handle on their money. These are the folks who have really good incomes but somehow still manage to spend it all every month. If this is you I’d say you need a kick in the pants. You’re not going to want to be working when you’re 80. I don’t care how much you love your job.
Steps to Take You Down the Right Financial Path
Goal Setting – Set Goals Big and Small
BIG GOALS – These are your security goals. The goals that when you achieve them will allow you to have a comfortable retirement. Look at this as an exercise in your future self. Write down your big goals and next to them write when you’d like to see it happen. What’s your deadline for achieving them? A few examples of big goals are:
- Beefing Up Your Emergency Savings – You Need 3-6 Months of Living Expenses
- Buying a House
- Retiring
SMALLER GOALS – These are your pleasure goals. This category requires money for things that you want, but don’t necessarily need. All those things that will make you feel good and give you something to look forward to. Again, write them down and write when you’d like to acquire them next to each one. Examples of smaller goals are:
- An awesome vacation
- That shiny new car you’ve been eyeing
- The updated kitchen you’ve always wanted
The good news is that when you make the decision to track your spending, live within or below your means, and begin to take saving seriously you’ll find that you’re able to afford the things that are in the smaller goal category much easier.
Identify Income and Expenses
Pull out all your pay stubs, bank statements, credit card statements and cash receipts. This may very well be the hardest part of getting your finances on point. While it may feel as though this step is going to be tedious and difficult, seriously it’s not that bad. And it’s so important. So block out a little time and really dig in to this. Your going to want to get a good idea of your yearly, monthly and weekly expenses so you’ll know where you stand. The obvious first step to tracking your spending is taking a good look at monthly bills that are consistent every month.
Track Your Yearly Bills
Don’t Forget to Track Your Spending on Yearly Expenses
- Property Taxes
- Homeowners Insurance
- Auto Registration
- Amazon Prime
Monthly Bills
Use a Spreadsheet or Calendar to Track Your Spending
- Mortgage or Rent
- Homeowners Association Dues
- Utilities
- Credit Card Bills
- Loans
- Car Payment
- Auto Insurance
- Transportation
- Cell Phone
- Netflix or Other Subscriptions
Track Weekly Spending
A Little Here, A Little There Can Sabotage Your Budget – Pay Attention Here
- Groceries
- Fuel
- Clothing (incidentals, not necessarily weekly)
- Gifts (incidentals, not necessarily weekly)
Look at your statements to get a good idea of where your money is going. People sometimes forget to look at the yearly and weekly expenses to calculate how much they’re really spending. Incidentals can really push the envelope too. A little here, a little there can completely blow your budget.
Want a great way to track your finances? Check out these two finance trackers. I’ve used them both and they are both really great tools.
Personal Capital is a free online financial planning tool that is the modern way to track & manage your net worth. It includes personal advisor support and the ability to access all of your accounts in one place. Additionally it enables you to calculate your net worth, track your spending, set a budget, manage investment accounts, and plan for your retirement. The comprehensive dashboard allows you to link all of your external financial accounts and get immediate access to a comprehensive view of all your accounts. Even more, Personal Capital offers Full Fiduciary Commitment. Personal Capital Services Include:
- Investment Strategies
- Tax Optimization
- College Savings
- Retirement Planning
Mint automatically downloads transactions from your bank, credit card and investment accounts. It helps you to create a budget and then tracks your spending and monitors your credit score. Mint allows you to combine all of your finances in one place, giving you a complete overview of your financial status. With Mint there is also the option to set up alerts and automatic bill-pay which really helps you track your spending.
A good way to look at your available money to spend is to do a little calculation.
Jot Down Your Yearly Salary
For the sake of example let’s just say your yearly salary is $50,000. First you have to deduct for Uncle Sam. He’ll want about 1/3. So let’s use 30% to taxes.
- 50,000 X 0.7 = 35,000
- 35,000 divided by 12 = $2,916.66 per month take-home pay.
This will be the amount that you’ll have to work with monthly. Ideally, you’ll want to put about 20% of that into savings or $583.00 leaving around $2334.00 for living expenses. If your expenses outweigh your monthly take-home pay then making some adjustments to your lifestyle is in order.
Identify Wants Versus Needs
Tracking Your Spending on Little Things Can Add Up to Oh So Much!
It probably won’t be easy at first but with persistence you can put the impulse spending monster to rest. How many times have you bought something thinking you really wanted/needed it just to have it remain unworn, unused and basically just taking up space? When you take a moment to ask yourself a few questions before you pull out your wallet you will be on your way to less clutter n your house and more money in your wallet.
- Do I really need this or do I just want it?
- Can I live without it?
- Will buying this get me closer to or farther away from my financial goals?
Pay Off Your Debt
Personal Capital and Mint can be helpful to get a snapshot of your current debt. Or just grab all those bills and start taking a look at the balance and the interest rate. It’s important to your financial future that you get out of debt as soon as possible. For now, let’s leave the mortgage out of it. Once you’ve gotten out from under the credit card debt, the car loan and student loans you’ll have a lot more freedom and may decide to tackle the balance on your home.
- Set yourself up to succeed by paying extra on the loan or credit card that carries the lowest balance first. Pay extra only on that one until it’s paid off.
- Again, pay extra on the lowest balance card until it’s paid off and also apply the extra funds you were paying on the other card. In other words, you’re still paying the same total for your bills. But with the first one paid off you have extra to pay on the next bill.
- Keep doing this, always paying the extra that would have been paid on the other debts until all your credit cards and loans are paid.
You may need to start small. Even $20 dollars extra at first will get the debt snowball rolling. I learned this technique from Dave Ramsey. It’s really great and it works! His book The Total Money Makeover is a must-read to get your financial house in order.
Put Your Plan Into Action
Decide ahead of time where your money will go before you get your paycheck. Allocate money for housing, food, utilities and other ongoing living expenses. Make sure you have some money set aside for unexpected expenses and debt payments. Paying attention to your money and avoiding unnecessary purchases will protect you from having to rely on credit cards to pay your living expenses. Look for ways to make extra money, like selling things around the house or applying for a better job. Also, look for ways to reduce your spending. And remember, things will come up, like school expenses or an annual membership so have some money set aside for these types of things.
Be easy on yourself and ask for help if you need it. There are so many great resources out there. Books on Personal Finance and organizations like The Credit Assistance Network. Getting on track can take a couple months of mindset adjustment but once you do you’ll never look back.
You may also like:
- Negotiating to Save Money
- What is an Emergency Fund & Why Should You Have One?
- Simple Ways to Save Money
- Meal Planning to Stay Healthy & Save Money
If you’re searching for a tool to help you along the way to achieving your goals you owe it to yourself to check out the SELF Journal
With it you will:
- Achieve big things – Use the proven system to optimize your performance by aligning your day-to-day output with your big goals.
- Believe you can smash it – Incorporate the success tactics of the world’s top performers into your everyday life – effortlessly
- Deeply connect with your goals – Daily gratitude, reflection, and goal setting combine with 30-minute scheduling to keep you laser-focused.
- Quadruple your output – 13-week goals cut procrastination and maximize your productivity by keeping the end is in sight.