Personal finance management is all about gaining control of your money. As we use these money management tips, we open ourselves up to a whole new world of opportunity and freedom. It may be hard to think about your finances as freedom right now because you feel bogged down. However, by shifting your mindset and getting your finances in line, you will begin to create more control and freedom in your life.
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By following these simple steps you can begin your journey to a life free of worry about money. These steps will help you to gain control of your finances and guarantee that you are always in charge of your destiny.
6 Tips To Gain Control Of Your Money
1. Calculate Your Monthly Income
I know this sounds like a no-brainer but every good budget starts with knowing your income. Income is the dollar amount you take home from your salary each month after all deductions and contributions to accounts such as your HSA, and retirement.
Calculate ALL sources of income
- Examples of Possible Income Sources
- Monthly Take home pay from Job: $3000
- Rental Income: $400
- Side job income: $200
I understand if you are living paycheck to paycheck it can be very frustrating. We are going to help you ease into a life of gaining control of your money. Read on to learn the skills we used to help gain traction and rid ourselves of financial trouble and debt.
2. Track Your Bank Statements And Credit Cards
The biggest step in taking control of your finances is to track your spending. This is the single most important thing you can do and this alone may help you save thousands throughout the year. There are several apps available to help with this, Personal Capital and Mint being the two most popular.
Tracking your spending is not only important to see where you spend your money but it will also help to catch fraudulent charges or other account errors. Through tracking, you will see your frivolous purchases and how they add up to more than you think. Eliminating these is an easy way to find extra cash.
3. Create A Monthly Budget
A monthly budget is a must for anyone trying to gain control of their finances. Your budget will help you keep track of your spending and improve your overall financial health. Creating a budget doesn’t have to be difficult or even stressful.
1. To begin your budget start by calculating your Fixed expenses – Fixed expenses are those that you must pay each and every month (rent/mortgage, electric, water, sewer, insurance, vehicle payments, trash, and groceries).
Examples Of Possible Fixed Expenses
- Mortgage: $1000
- Health Insurance: $30
- Car payment: $400
- Car Insurance: $50
- Electric: $65
- Water: $20
- Trash: $10
- Groceries: $400
2. Next, calculate your Discretionary expenses. Discretionary expenses are only factored in after you have prioritized your fixed monthly expenses. Discretionary expenses are optional and non-essential for your living. These can be adjusted based on your income.
Examples Of Possible Discretionary Expenses
- Daily trips to the coffee stand $120
- Entertainment: $200
- Personal care: $50
- Other: $175
After you have calculated all your expenses step back and take a good look at your budget. Which areas can you reduce or cut completely out?
4. Gaining Control By Creating Goals
Now that we have an idea of where your money is going we can start to set some goals. Goals are measurable and will be the light at the end of the tunnel as you take control of your finances. While some goals may be small to start don’t be discouraged. Every little bit helps and these small changes will bring about bigger changes down the road.
Try to set short, mid, and long-term goals to keep you motivated for your future. Get specific about what it is you want to achieve. Whether it be getting out of debt, affording your dream home, or achieving early retirement, be sure to keep your goals in sight. This is where you will see the progress that is cheering you on.
Decide for yourself exactly what you want your money to do for you. Will you put money in a savings account for a down payment on your dream home? Will you put your money into your retirement account to retire early? Do you want to go on the trip of a lifetime?
By creating goals it allows you to strive for creative ways to achieve your goals. What is it that you will do to make your goals happen? Do you need a small side job that will make you an extra $500 a month?
Getting control of your money is not about being stripped of things from your life it’s about adding freedom and control to your life. Both now and in the future.
- Write all your goals out into actionable steps
- I will Save $100 each month to put into my retirement account
- I will Deposit $50 a month into my savings account for my trip to Ireland
- I will put $250 a month into my savings account for my dream home I plan to purchase in 3 years
5. Pay Yourself First
This was a big one for us, make it easy! If getting money into your savings takes 3 different logins and 5 minutes on the computer it will never happen.
Make saving your money easy by automatically depositing a portion of your paycheck into a dedicated savings account. We use Acorns which not only saves your spare change for you but will do automatic deposits as well.
In addition, it’s putting that money into a higher-yielding money market savings account. Be realistic about the amount of money that you can deposit each month and then have it automated to go from your paycheck directly to savings.
If you are one of those people who may be tempted to dip into your savings you may want to consider opening a savings account at a bank other than the one you normally do business with. This will lessen your ability to easily transfer money on a whim. Out of sight and out of mind can be a blessing when trying to save.
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6. Don’t Give Up
What’s the point of spending all this time and effort making a good plan if you don’t stick with it?
I recommend taking one day each month to review your spending and adjust your budget where needed. Give this process a bit of time to work for you. By being patient and allowing for an adjustment period you can start building a life free of financial hardship.