Are you tired of feeling like you just can’t get ahead with your finances?
Make this the year you finally start to stress less and save more.
Here are 5 steps to help you take control of your finances.
Find Your Why
To truly be in control of your money, you need to have something guiding your decisions.
Doing the rest of the steps below won’t matter if you don’t understand WHY you want to take control of your money.
Knowing WHY you want what you want is the most important step in actually achieving it.
Having a clear purpose for your actions will help you make better decisions moving forward – ones that lead toward your goal instead of away from it.
Just saying you want to pay off your credit card isn’t enough. You need to have a reason that compels you to make the right choices if you want to have success.
You’ll be better equipped to cut expenses that don’t align with your values once you’ve actually defined what those values are.
Plus, you’ll be more motivated to reach your goals if they truly reflect your values instead of trying to reach arbitrary goals made by someone else.
Determine Your Goals
Once you know WHY you want to get your finances in order it’s time to set some specific goals.
Are you trying to save more for retirement? Maybe you want to pay off some credit card debt or build your emergency fund.
If you’ve got more long-term goals, it’s a good idea to break them up into smaller, short-term goals to help you stay motivated.
It can be hard to stay focused on saving for something like retirement that could be decades away.
But breaking that up into smaller milestones like putting in enough to get your employer’s match or maxing out your retirement accounts every year are some short-term wins that also contribute to your long-term goals.
Figure out exactly what you want so you can make a plan to get there.
Make a Budget
You’ve chosen your destination (your goal), you’ve got the purpose behind what’s driving you there (your why), now you just need to map out how you’re going to get there.
That’s what your budget is.
It’s the roadmap for how you want to spend your money.
By breaking down your expenses, you can decide which ones take you in the right direction, and which ones are hindering your progress.
The trick to making a budget you can stick to is to make sure you’re spending in line with your priorities.
Ruthlessly cut the non-priority expenses and focus on the ones that will help you reach your destination.
It’s ok to take a detour every now and then. Maybe an unexpected expense pops up or your priorities shift.
Just because you’ve made a budget doesn’t mean you can’t adjust it.
In fact, being able to roll with the punches and adapt your budget as needed is critical to your success.
It will keep you from just tossing your budget aside and giving up on your goals altogether when confronted with unexpected expenses.
Track Your Spending
Even if you’ve got a goal and a plan to reach it, sometimes you may feel stuck.
You know you’ve got the resources and you think you’re making the right choices, but at the same time it feels like you’re treading water, or worse, moving in the wrong direction.
Usually, this comes down to a lack of awareness about where your money is actually being spent.
More than likely your expenses aren’t in line with your priorities.
The best way to have a clear understanding of where your money is going is to track your spending.
Most of us think we know how much we’re spending, but the truth is usually another story.
For me, tracking our food costs was the most eye-opening aspect of our entire financial journey.
Between groceries and dining out, I had NO idea we were spending as much as we were.
Simply by tracking our spending I was able to find hundreds of dollars in savings.
That was extra money we were able to use to pay off our credit card debt and build our emergency fund faster than we had expected.
If you want to take control of your finances, you have to know where your money is going.
Track Your Progress
If you’ve ever taken a road trip with kids (or watched practically any family movie) you’re familiar with the constant refrain of “Are we there yet?”
Most financial goals can feel like that.
It’s partly because a lot of financial goals are long-term like saving for retirement or paying off your student loans.
But even short-term goals can cause frustration if you don’t achieve them when you think you should.
It’s easy to feel overwhelmed or frustrated as you work toward your goals, but by tracking your progress you’ll be more likely to stay motivated.
Tracking your progress will help you see that all your effort is in fact leading somewhere.
Seeing your credit card debt going down or your emergency fund filling up will help you keep making the right decisions to reach your goals.
I like to use printable savings trackers to keep focused as I work toward my goals.
But depending on the period of time it will take to reach your goal you may want to use other tools like a spreadsheet or an app to track your progress.
I use Personal Capital to track our net worth. Not only does it give a great picture of our overall progress toward reaching financial freedom, but it’s also free!
Personal Capital is the fastest way to track your net worth and monitor your accounts. Best of all, it's free!
Personal finance is called personal for a reason.
Not only are all our financial situations different, but our goals and the driving force behind our actions are all different as well.
If you’re ready to take control of your finances once and for all, following the 5 steps above will give you the foundation and confidence to do so.
You’ll no longer wonder where your money went or stress out over bills coming due.
You’ll have a clarity around your financial plan that lets you dictate the terms of your spending and a new confidence in your financial stability.