People always talk about being better with their money, but the bottom line is that there needs to be action to back it up. When it comes to finances, setting up a money plan is the first step to getting them in order once and for all. It goes further than simply creating a budget, although that’s a great place to start, as is using a budget calculator. It’s taking a deeper look into your current financial situation, your financial history and then, what you would like your financial future to look like.
How To Prioritize Your Finances
If you’re like most Americans, what you want to do and what you can do based on your current income are two different things and can be a struggle. However, before you allow yourself to get too overwhelmed, there are a few tips for putting your finances in order. Like with any lifestyle change, prioritizing your finances will take time, but once you have a basic plan in place, you can adjust it as needed without quitting it altogether.
First, plan a fund dedicated solely to emergencies.
Many people have that “emergency” credit card used for life’s unexpected surprises, such as car repairs, medical expenses, or a cushion for a particularly tight month of finances. I read a Chase Sapphire Preferred review that I liked, so that might be a suitable option. In addition to a credit card, it’s a good idea to also have savings stashed away for such expenses. Depending on your budget, save up at least $1,000 as your emergency savings to help combat those all-of-a-sudden costs.
How to implement: Cut back on dining out or monthly unused memberships or subscriptions and put this and any extra money towards your savings. You can also set up a certain amount from your paycheck to automatically be deposited into your savings every month, so you won’t miss it being gone.
Second, start tackling your debts.
Yes, it can be tricky to save and pay your debt at the same time, all while keeping to a budget, but it can be done. It requires discipline and consistency. Some people choose to pay off their debts with the highest interest rates first. Others decide to break their debts down from the smallest to highest amount and start with the lowest debt first. Whichever will make it easier for you to set up a plan and stick with it, choose that option and start slashing your debt.
How to implement: Make a spreadsheet listing all your debts, the amounts due, and the interest rates for each. Add a column for a due date for each debt to be paid off. Set automatic payments ahead of time that correlates with your chart and delete each debt as it’s paid off so you can visually see your financial wins.
Third, pay your taxes.
Paying taxes makes everyone groan, but they are a constant in life, so it’s best to pay in full and on time to avoid additional fees and notices from the IRS. If you’ve been feeling downtrodden by back-owed taxes, don’t ignore the problem. Explore your options. Programs like the IRS Fresh Start Initiative is a way to help people who are in debt and need a boost out. Professional tax relief services help individuals understand these types of benefits, and any downsides, and if they qualify for these types of programs.
Fourth, divide your “needs” from your “wants.”
Certain things like cable TV or a monthly magazine subscription may be so routine that they seem like “needs” when in reality, they are “wants.” List out every single monthly expense you have and put them in one of the two categories. A financial diet is similar to a health diet and you shouldn’t simply deprive yourself. Allow yourself a small splurge or two, but work it into your monthly budget, so you don’t get too far off track.
How to implement: Write down all your expenses and itemize them. Things like rent, electricity and groceries are needs. However, there are ways to cut costs even when it comes to necessities. Think about downgrading your living space. If you have a two-bedroom, but don’t actually need the extra space, rent a one-bedroom or studio instead. Plan a grocery list ahead of time to keep within your budget and to prevent any spontaneous purchases at the checkout line. When it comes to wants, cancel your monthly cable (this is usually between $30 and $100 per month!) and get something like a Google Chromecast.
With a one-time payment of about $30, it will save you a good amount in the long run. You’d be surprised how many extra costs add up over a month on things you don’t need or really even want at all.
You can take control of your money rather than feeling like it’s always controlling you. Prioritize your financial goals and make sure to check your progress (and any potential setbacks) week-to-week to ensure a successful plan.
Thankfully I am married to an accountant. He keeps me in line 🙂
Oh I bet he does! That definitely sounds like a great person to be married to if keeping your finances in order is a priority to you. 🙂
Those are great tips. Thankfully my husband and I are pretty good with money and have made wise choices for now and the future.
Without an emergency fund you’re screwed. It has to be the first thing you put into place.
Dividing needs and wants can be tricky. It’s always hard to figure out if some things (WiFi for example) are needs (because of business) or wants (because…wifi).
This is great. I think I do pretty well with my budgeting and keeping track of everything but extra tips are great to have!
We are definitely savers but we have been spending lately! Great post – it’s all about being re
These are some great ideas! Being in debt is such a heavy burden so I’m super aware of my finances now.
We do keep a spreadsheet. It helps us to keep track of what payments we have for the month and the money that is coming in.
These are great tips. We have cut back on eat out on the weekends. We are saving that money for an emergency.
Tackling your debts is very important because it improves your debt to income ratio. I’m currently trying to become debt free myself.
Good luck. I hope that you are able to reach your financial goals soon.
We’ve been cutting back on travel. We are keeping it close to home on vacations this year so we can afford to get our daughter a new car next year.
What a great expenditure to save for. I am sure that she will really appreciate it.
These are great tips and should be followed if you really want to manage your finances well. Discipline and knowing your priorities are very important.
There are a lot of tips to help us keep track of our finances and your tips are great ones too. My weakness is getting more than I need when I am in the supermarket. Now I never enter those supermarket doors without a shopping list.
Great tips! There’s a lot of ways to keep track of things, but the main thing is. Do it, don’t stop doing it. Once your in the habit it’s easy
I chose not to have cable or satellite so help reduce expenses. I also cook most of my meals at home.
We try to keep a $1000 emergency fund in the bank at all times. More than once, it has saved us from taking out the credit card to pay for a home repair or unexpected medical bill. We try to keep it stocked by putting a little money in with each paycheck.
This is a great list! We’re on step 4 now, however, after you’ve completed the previous steps, it’s a lot easier to discern needs from wants. Also, part of me wishes this was the first step, as paying things off and gathering that emergency fund would be much easier. I do think it’s a lesson learned over time, though. You can’t just want to know it- needs vs wants is a growth process.