Finances are a touchy subject for many people. We often talk openly about our health, relationships, and other very personal topics but keep finances very private. As a result, many of us do not spend the time making sure our personal finances are organized and can help us achieve our goals.
The first step in getting organized is setting up a system to keep track of your money. If you are comfortable with putting your financial information online, there are a multitude of programs and apps that can help you manage your money. If you don’t want to share your information, you can set up a spreadsheet on your computer or even use a notebook. The important point is that you have a system to keep track of your finances.
Once you’ve decided on a system to organize your finances, you need to get together all the information you need, including:
- Your income: when and how much do you receive?
- Your expenses: both fixed and discretionary
- Your savings/investment goals
You need to record the frequency and net pay from your paycheck so that you know how much money you have to spend through the month. You should also record income from a second job or other sources such as a rental property. Don’t take the net pay shown on your paycheck for granted; you should look at each type of paycheck deduction to make sure it is accurate. Do you get a large tax bill or refund from the IRS every year? If so, you should look at your income tax withholding and adjust it.
You also need to look at your expenses or the money you pay out every month. The two general types of expenses are fixed and discretionary. Fixed expenses include costs such as rent/mortgage, car payments, and insurance and generally don’t change from month to month. Discretionary expenses include items like vacation travel, entertainment, and restaurants that you can control.
Finally, you need to consider your savings and investment goals. You may think that these goals are out-of-reach for you, but even a modest savings goal can be attained. You should set a goal for yourself. A goal of saving $25 a week would put you ahead of many people. A recent survey from the government revealed that 40% of Americans would not be able to pay an unexpected $400 expense without using a credit card or borrowing from someone.
You should have a good idea of your financial situation after you organize your income, expense, and savings goal information. If your analysis shows that you need some additional money to cover your expenses, several options can help you such as picking up a side job or getting an installment loan.
Personal finances are a source of stress and anxiety for many people. You should take charge of your finances and get them organized and working for you. Following the steps above will help your financial situation.