Today I’m sharing some important info from my friend’s company, Money Crashers! Check them out if you’re looking for money news. And also, I love their take on feeling empowered and in control of your finances – just like I help women feel in control of their health & fitness 🙂
David Bakke is a regular contributor for Money Crashers Personal Finance, a top resource for all things money management.
For years, I let my finances run me, and they sure did a good job of it – to the tune of about $30,000 in credit card debt. When the stress and strain became too much to bear, I vowed to turn things around. Although I didn’t really know where to begin, I knew the most important thing was that it happen now. As it turned out, just getting started was the hardest part. After that, things were much easier than expected.
Here are four tips to make you master of your financial domain:
1. Create a Budget
This is a critical first step, as you can’t manage your money until you know how much you have and how much you spend. To make a budget, get a sheet of paper, and on the left hand side write down monthly income from all sources. On the right, write down your monthly bills.
Go through them strategically. Start with credit card payments and fixed expenses such as cell phone, Internet, and cable or satellite TV, and include estimates for variable expenses. Don’t forget to factor in a monthly amount for big-ticket expenses like auto or homeowner’s insurance, even if you pay those annually. Once you see how far apart your bills are from your inflow, you can take action.
2. Eliminate Credit Card Debt
Carrying a balance on your cards is just silly. Truth be told, you’ll never have full control over your finances until all credit card debt is gone from your life. To see how long this will take with various payment scenarios, there are plenty of online calculators available. Say you’re $5,000 in the hole and paying an average 14% APR. With a $300 monthly payment, you can be out of debt in 19 months. Bumping that payment up to $400 has you debt free five months earlier. And in the meantime, pay cash for everything.
3. Impact Monthly Bills
Competition is intense in the cell phone, Internet, and TV industries. Get out your monthly statements, do a quick Internet search, and see if you can save money by switching providers. And since you’re likely already paying for a nationwide cell phone plan, consider eliminating your landline. To save on utilities, simply use them less. Take shorter showers, turn off appliances when not in use, install low-flow toilets and showerheads, seal up drafts, and so on. Most of this is DIY home maintenance. And if you haven’t been doing so, start clipping coupons – it makes a huge difference in your monthly outlay.
4. Establish an Emergency Fund
Do the aforementioned, and you should start to see an uptick in your cash flow. Now, you have to do something smart with that extra money. Start putting some of the savings you’ve reaped into an emergency fund to help with unexpected needs. Shoot for at least six months’ worth of living expenses, but don’t panic if you don’t get there right away. Once again, the most important part is just to start. With a little luck, you’ll have the funds built up before your next emergency hits – if it ever hits.
None of these steps requires any sort of rocket science, intense financial planning, or major sacrifice. And you will start seeing benefits almost immediately. Before you know it, you’ll be in charge of your finances instead of the other way around.
What other ways are there to take control of your finances?