How much of your time do you spend thinking or worrying about money? According to a report by the American Psychological Association, 72% of adults are stressed about finances. Whether the concern is about needing more income, getting out of debt, or planning for the future, through some specific steps and ongoing discipline, you can get your finances under control.
Monitor Your Spending
The first step in corralling our finances is paying attention to what is coming in and what is going out of our pockets. Because we instinctively swipe our credit or bank card more than spending tedious hours balancing checkbooks, it is a lot easier to lose track of each penny. When we exhibit such carefree behavior, frivolous spending can more readily occur and accumulate.
For the next month, keep track of every cent you spend. The most important part to making this successful is that you behave normally even though the goal is to eventually improve your financial behavior. If you pay by cash, make sure to save all your receipts and then write down each transaction. If you use a credit or bank card, then you can download your statement at the end of the month. Remember, it’s critical that you are honest in exhibiting your regular spending habits.
Organize Your Debt
In a healthy financial plan, it is important to work on outstanding debt as well as day-to-day spending. Take the time to locate and gather all your latest statements and make a spreadsheet where each row has the lender’s name, monthly payment, total amount owed, payment due date, current interest, and any annual fees. Take the time to call your creditors and see if you can have any interest rates lowered.
Also, do a credit history check by getting your free credit report from all three credit agencies at http://annualcreditreport.com. Make sure there are no incorrect entries on the reports. If you plan on applying for credit, a negative entry could affect your ability to get your application accepted. If there are any mistakes, follow the instruction from the agency in disputing an entry.
Another form of debt most people fail to consider is tax debt. Unpaid taxes carry a percentage based penalty for the total tax amount that was not paid. Not only does the IRS charge the initial penalty, they also charge monthly interest on the total tax debt. If you currently owe money to the IRS, please consider consulting a tax debt relief professional, such as Tax Debt America.
Make a Budget
The next step in taming your money is making a budget. You can do this using pen and paper, or you can use a spreadsheet program, or an online tool like Mint. In your budget, list your income and your expenses. This will include large items like your mortgage/rent, car payment, student loans, household bills, other loan and credit card payments, as well as smaller items from the expenses you discovered while tracking your spending.
A budget helps you to clearly see if you are spending more than you are bringing in, allowing you to make needed adjustments. If you are spending too much, what are areas that you can cut? Having to remove items can be a little disheartening, but it is actually an important part of exhibiting control over your money! Be encouraged; know the sacrifices made today are shaping a financially successful tomorrow. If there is money left after your monthly expenses are taken out, then it is a great time to secure your savings.
Start an Emergency Fund
A lot of people struggle with starting an emergency fund because there are always other things to do with money. An emergency fund is like life insurance, you hope you won’t need it, but in a tough situation, you’ll be extremely happy you have it. What would you do if you had an extremely expensive house or car repair? How would you cover expenses if you lost your job? Costly emergencies like these are a common reason people fall into debt. If aggressively tackling debt or dealing with a really tight budget, it’s recommended that you start with $1,000 until able to build up to six months of income saved.
Take the time to carefully organize your finances and come up with a budget and a plan for debt repayment. If avoided or neglected, money problems will continue to flare out of control. With patience and persistence, you will be successful in managing your finances.
