Ask Away...: 6 Steps to Getting Your Finances in Order

Monday, January 4, 2016

6 Steps to Getting Your Finances in Order




It's been quite a while since I published my posts about getting on a budget and my budget spreadsheets so I figured I'd do another post that basically sums it all up again.   It's a new year and a new chance for you to get everything organized so you can get out of debt, build up your savings, or achieve whatever financial goals you have. 


Step 1 | Evaluate Your Spending Habits
Print out a debit card statement, look at your receipts for the last 3 months, or check out your checkbook register so you can see where you've been spending money.  Categorizing each expense as a bill (utilities, mortgage, etc), groceries/toiletries, fun, and other.  Where is your money going??   See how much you spend each month in each category.  This is a great way to pinpoint your money management issues.  For a while I was spending so much money on clothing (fun category) that it was no wonder I couldn't afford groceries for the month! 


Step 2 | Determine Your Debt
Debt is any kind of money you owe to pay down something like a car payment, a mortgage (I actually don't count this as my debt anymore since this will be my forever home), and credit cards.  What you want to do is use my debt snowball tracker that you can purchase for $5 and add every card, debt, etc to the spreadsheet. 
























Step 3 | Create a Budget
Now that you know where your money goes, how much your bills are, and how much debt you have, it's time to create a budget.  Using my $3 budget spreadsheet you can easily enter in your monthly expenses and the amount you'd like to pay towards your overall debt (we will go over this in the last step) and see if there's a difference between your income and expenses. When you fill in your categories you can estimate the costs, but make sure you allow yourself money for different things.  It's important to allow yourself fun money or else you'll be miserable, trust me.   If there's a huge difference you will have to look into adjusting the amounts you spend on certain things.  For instance, if you find you eat out 5 days a week for lunch, consider packing a lunch now.  

Also, determine what mini funds you want to put money away into.  I put money away for vet costs for my dogs and for my car maintenance. 








Step 4 | Spend Carefully
I use the cash envelope system adopted from Dave Ramsey to control my spending.  I determine the amount of cash I need for each category (and my mini savings funds) and I take out that amount every payday.  Spending with cash makes me way much more mindful of my purchases.  I go into much more detail in this post and answer all sorts of questions about different scenarios that may come up. 


Step 5 | Build up an Emergency Fund
Do whatever you have to do until you can get $500-$1,000 saved up as an emergency fund. Your emergency fund helps provide you with emergency money so you don't need to use a credit card.  Some people build up their emergency fund by selling lots of stuff online, working extra hours, or doing odd jobs for friends, family, and neighbors.   Make sure you build up your emergency fund first before trying to significantly pay down your debt so that you don't need to tap into your debt in an emergency. 



Step 6 | Pay Down Your Debt
For any debt you have, start the debt snowball.  Pay the minimum amount on each debt but pay a little bit extra (whatever you can afford) on the smallest debt.  As soon as that debt is paid off, take the amount you were paying on it each month and add that to the minimum payment of the next higher debt.  This creates a snowball that builds momentum as you go because when you pay one debt off it motivates you even harder to pay off the next one...like a snowball! 


 

Did you know that I offer a budget spreadsheet, debt tracker, and I have a financial book available for purchase? 




PURCHASE PRINT BOOK



PURCHASE BOOK & Spreadsheet BUNDLE



PURCHASE Spreadsheet Bundle



PURCHASE Budget Spreadsheet


PURCHASE Debt Tracker


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2 comments:

  1. These are some great tips. I actually do a lot of them especially #6. On all my cards, I always round up to at least the next $5 mark. So, if the minimum payment is $36, I pay at least $40. Just that little bit really helps. :)

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