Personal finance can seem scary, unapproachable, and complicated. But it doesn’t have to be. Here are a few simple steps you can take to begin learning more about your finances. Start following them right away and begin working toward a better financial future.
- Make A Household Budget & Track Every Dollar You Make (And Spend)
First and foremost, you should create a household budget that will track every penny of your income, and everything that you spend. You can do this manually by tracking your bank accounts and credit cards, or you can choose to use a tool like Mint.com or You Need A Budget (YNAB).
Want help creating a household budget on your own, without the help of software? This guide from NerdWallet is a great place to start.
- Create a Document Outlining Your Debt Obligations
You should make sure you understand how much you owe in debt. This includes all types of loans – personal loans, student loans, mortgages, auto loans, and even payday loans or title loans, if applicable.
Make sure you understand how much you owe in debt each month – and which loans have the highest interest rate. This will be helpful if you plan to use the “debt avalanche” method to repay your loans starting with the highest-interest loan.
- Determine Your Net Worth
Your net worth is useful to know for financial planning purposes. It’s calculated by adding the value of all of your assets, such as bank accounts, retirement accounts, and cars or real estate, and subtracting the value of your debt.
Tracking your net worth over time is a great way to understand your progress toward your financial goals, such as retiring or repaying debt such as personal loans or an auto loan.
- Organize Your Bills & Automate Payments
Whenever possible, choose to receive bills electronically via email, and automate your payments. This minimizes paperwork and reduces the risk that a bill will go unpaid, which could lead to late fees, dings to your credit, and other such penalties.
- Set Your Financial Goals & Begin Working Toward Them
What’s your goal? Are you already financially stable, but looking to retire early? Do you want to pay down your personal loans quickly to save on interest, and start saving more money? Do you want to save and start a family? Think about what you want, how much money you’ll need to get there, and the steps you can take to reach that goal. This will help guide you as you organize and adjust your finances in the future.
Follow These 5 Steps to Stay Organized and Get Your Finances on Track
As long as you take these simple steps, you’ll have the guidance and information you need to make better financial decisions. So, get started today, and make sure that your finances are on track.
Disclaimer: This content does not necessarily represent the views of IWB.