You’re tired of never really knowing how much money you have for various expenses, or maybe you keep running out of money before you get your next paycheck. Perhaps you’ve started to worry about the size of your retirement savings, or your credit card debt doesn’t seem to be getting any smaller. If you are like most people, you are facing some or all of these problems, and figuring out how to deal with them can be daunting. It’s easier to organize your financial life if you think about it in categories.
Budgeting is the first step in getting your finances in order because there is not much you can do before you know what is coming in and what is going out. You need to list all of your regular and irregular expenses when you are creating a budget, so keep in mind that this includes things you may only spend money on occasionally, such as haircuts, or once a year, such as birthday gifts. If you aren’t sure where your money is going, this does not make you unusual, and there are a number of apps you can download to track your spending and help you budget. In order to get a fairly accurate sense, it’s best to track for about three months. Creating a budget may be an eye-opening look at where your money is going and why you always feel short of what you need. Once you have looked at your debt and your savings as described below, you can figure out how much of your budget should go toward these.
If you don’t have any debt, you are well ahead of most people. If you do have debt, the first thing to do is look at what is considered ‘good’ vs. ‘bad’. A mortgage is considered good debt, and while it is better to pay off a mortgage sooner rather than later, you don’t need to apply the aggressive tactics that are appropriate with other types of debt. You should look at the interest you are paying on various types of debts and if you can get that lowered. For example, interest rates on credit card debt are generally high. You may want to consider taking out personal loans to cover this and any other high-interest debt. Do some research online to find the right personal loan for your circumstances. You can get matched with options in about a minute.
Finally, it’s time to look at your savings. It’s generally better to pay off high-interest debt before devoting a good portion to savings, but you should have an emergency fund and actively make retirement contributions. Your emergency fund should have around three to six months’ worth of expenses in it. If your employer has a retirement plan, you should contribute as much as you can to it, particularly if there is a matching plan. One good way to save more easily is to have your bank automatically deposit a certain amount of money into a savings or other type of account instead of your checking account.