How to Get Your Finances in Order: 6 Simple Steps

Did you know that two-thirds of Americans would struggle to scrounge up $1,000 in an emergency? In other words, a lot of people struggle with their finances.

So if you’re having a tough time, you’re not alone. And the good news is that there are lots of things you can do to get control of your financial situation.

Wondering exactly how to get your finances in order? In this article we’ve compiled 6 simple steps you can use to make it happen.

Read them below!

1. Evaluate Your Income

The first thing you need to when figuring out your finances is to evaluate your current situation. How much money do you have coming in every month? What do you get paid after taxes and insurance?

Do you have any other sources of income like a second job, child support, or alimony? Don’t forget to consider these sources as well.

2. Calculate Your Expenses

It’s also important to look at where your money is going. You need to be upfront and honest with yourself and your spouse (if applicable).

Take a look at your last 3 months of credit card and bank statements. Where did you spend your money?

Start by making a list of your fixed expenses. These are things that you pay on a regular basis. These could include:

  • Rent or mortgage payments
  • Car payments
  • Car insurance
  • Utilities (gas and electric)
  • Childcare expenses
  • Cable and internet
  • Cell phone bill
  • Other subscriptions including Netflix or Hulu
  • Any debt payments on student loans or medical bills

Do you have any credit card debt that you need to take care of? That can be tough to do on your own. Click here for more info about getting control of your debt.

Next, look at your variable expenses. These are things that change from month to month.

These are things that you know you’ll have to pay but vary in cost. Common items are food, entertainment, and gas.

Also make a category for other expenses like birthday gifts and car maintenance. These are things you don’t plan for on a regular basis but that often need to be paid for. It will also help cover unforeseen expenses.

Add these all together and you’ll know your monthly expenses. Subtract this number from your monthly income and you’ll see if you’re spending more or less than what you earn.

Going through this process will also give you a better idea of excess areas in your budget.

3. It’s Time to Trim

The good news is that the hardest part, calculating your expenses, is over with. Now it’s time to look at areas where you can cut back.

Do you spend way too much on clothes or coffee? Perhaps you’ve been eating out more than you should be. This is the time to set a goal to spend less.

For example, instead of going out to eat 5 times a week, cut it down to 3 or 4. That way you can still enjoy yourself but do it in a financially responsible way.

Also think about which of your expenses are needs, which are wants, and which are nice-to-haves. When you look at your budget through these eyes, you’ll see everything through a new perspective.

Also consider ways you can save. One idea is to call your internet, phone, and cable providers to see if you can qualify for a lower rate.

You could also do the same with your car insurance company. Often you can secure a better deal by doing this.

4. Save, Save, Save: Another Idea on How to Get Your Finances in Order

The last thing you want is to have an emergency and not have the cash you need to get out of it. To avoid this, it’s crucial that you set up a savings plan every month.

Now that you’ve gone through your income, expenses, and trimmed some fat, don’t forget to save as well.

Set aside a specific amount and transfer it to a different account. That way you’re not tempted to spend it on something else.

What if your car needs a big repair? What if you lose your job? Would you be okay? If not, you should make a plan.

5. Give Yourself an Allowance

Once you’ve done all of these steps, it’s time to treat yourself. Now you know how much money you can spend without any guilt.

Whether you want to spend it on shopping, entertainment, or your favorite hobby, the choice is yours. And since you’ve already taken care of all the other parts of your budget, you don’t have to feel bad for spending this money.

That’s the benefit of budgeting: you won’t have to feel guilty when spending money on fun things any longer.

6. Stay on Track

You’ve set up a plan. Now the trick is to follow it!

This will definitely take some dedication, but it’s totally worth it. You’re now on track to have financial freedom.

If you’re married, make sure you’re both on the same page. Make each other accountable and communicate openly if you have any concerns or need to make any changes.

It can be hard to be open about finances with your significant other, especially if you haven’t been super open in the past. But doing so will improve your financial situation as well as your relationship. And over time, it won’t be uncomfortable anymore.

If you’re single, consider making a support system for yourself with your friends or family. When you’re accountable to someone else, you’ll be much more likely to stay on track.

Another idea is to also save for something fun like a vacation or money for a big night out. Make it a goal to achieve your budgeting goals, and if you do it, treat yourself.

It’s also important to think about what you’ll do if you slip up. No one is perfect, especially when you’re just starting out with a new budgeting plan.

When you make a financial mistake like overspending, recognize it, and choose to stop it quickly. That will make it so it doesn’t turn into a bigger problem.

Closing Thoughts

Well, there you go! 7 simple steps all about how to get your finances in order. Now it’s time for you to put them into place.

Have questions or want to learn more? Check out our consumer resources blog.

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