There’s nothing worse than dealing with money issues in your personal life. Whether you’re having trouble getting out of debt or making ends meet, money matters can cause an enormous amount of stress and frustration, both on the part of the individual who has to deal with them and on their friends and family. To help you get started, here are some practical steps to take to control your personal finances and improve your financial situation.
Set Financial Goals
When setting financial goals, it’s important to focus on the things that you want in life. It may sound cliché, but really do the exercises. You’ll be surprised what you find out about yourself and what you’re willing to sacrifice in order to get what you want. For example, when I sat down and thought about my goals for this year, I realized that I wanted more stability in my home life and more time with my family.
Setting financial goals is just as hard as coming up with any other type of goal. What is a good goal? What are some examples of good goals? It can be tough to come up with something specific because our lives are so varied. One way to help is by picking a few general categories (like housing or transportation) and then thinking about all the different ways we spend money in those areas (mortgage or rent, car payments). Some people even go so far as to create detailed budgets that list every single expense they have each month.
Ultimately, the best way to decide how much spending money we need is by calculating how much income minus how much spending equals how much is left over at the end of the month.
My monthly income – My monthly expenses = Leftover funds
Track Spending
Keeping track of where you spend money is the first step toward getting a handle on your personal finances. Make a list and categorize each expense into one of four categories: needs, wants, savings, or debt repayment. Needs are expenses that will keep you alive, like food and shelter. Wants are things that make life more enjoyable, like entertainment or clothing. Savings are funds set aside for future use. Debt repayment is the balance on any loans or credit cards. Then look at what’s left over after subtracting what you need from what you want and see how much money is left over for saving or paying off debt.
Create Savings
Setting up a savings plan is one of the most important steps in taking control of your finances. It’s a good idea to set up a plan for at least 3-6 months or as much as you can afford. This way, if you’re faced with an emergency, you’ll have some money on hand.
Setting up a bank account specifically for saving is also recommended. As well as setting up automatic payments that will deduct from your paycheck so that this money goes straight into the savings account and doesn’t get spent on other things. If you have any other savings accounts, it’s important that they are set up this way as well so that you don’t overspend on them and end up with nothing in the end.
Understand Debt
There are a number of things you can do to help get out of debt, but the first is understanding what you have. Your balance is the total amount of debt you owe, and it’s made up of two types: secured and unsecured. Secured debts typically include items like mortgages or car loans, while unsecured debts would be credit card balances or medical bills. It’s important to remember that secured debts should always be paid off before unsecured ones, as they are less likely to end in bankruptcy. Also, note that there are a number of ways you can tackle these debts–like through negotiation with creditors–or settle them by declaring bankruptcy which wipes out all unsecured obligations.
Learn From Your Mistakes
It’s inevitable that at some point in life, we’re going to make mistakes with our money. Sometimes these mistakes are minor, but other times they can have a lasting impact on our financial stability. The first step is admitting there’s a problem and then understanding why it happened so you can avoid it in the future. Don’t beat yourself up over it – just get back on the horse!
Get Support
Many people find themselves in a financial bind because they never learned how to manage their money. Life is unpredictable, and sometimes you need a little help getting back on your feet. But with the right support from friends and family, it’s possible to get back on track. Here are some ways to get the support you need.
– Get a monthly budget together and discuss it with your spouse/partner.
– Make a list of all outstanding bills, debts, and other responsibilities.
– Consider debt consolidation through credit counseling agencies or banks.
– Apply for government assistance programs like food stamps or Medicaid if necessary
– Work with a credit counselor to fix your debt.