It’s not impossible to handle your finances in this economy; it just takes some time. Getting your finances under control is completely doable if you take it step by step.
Know exactly where you stand in your finances.
You have to be able to answer these questions with specific numbers, not estimates.
- How much am I (or are we) in debt?
- How much income do I/we take home each month?
- How much are the monthly expenses?
- How much do I (or we) have in savings?
- Am I behind or delinquent on any bills?
- How much is in my retirement account?
- What’s my (or our) net worth?
Once you have a clear picture of where you are, you can see what you need to improve on.
- If you’re behind on bills, your priority is to catch up. See if you can work a payment plan or have a yard sale to raise money.
- Keep your expenses lower than you income. Drastically cut expenses until you have at least a month or two of expenses saved. See if you can receive rewards/discounts with from your bank or memberships. Cut down on transportation expenses. Use a free spreadsheet to budget to get a snapshot of your current situation and build a plan.
- Pay down high interest debt as fast as you can. If you end up on unemployment, lower monthly expenses will make the check go further.
- Set aside some money, even $50/paycheck, to grow your savings. Start small and automate your money to put into savings. You’ll become use to the slightly small paycheck as you start savings. You want a cushion in case something happens. Even if the economy gets better quicker than anticipated, you should have something set aside for emergencies.
Solidify your job by making yourself valuable.
You have to try and keep your employment as stable as you can. If you have already done so, start using the following tips to stay on board.
- Become a spokesperson for your company. Even if you’re not in sales try to see if you get another account for your firm. Search for idea that could being in money or cut expenses.
- Be sure the boss knows your value. It is YOUR responsibility to make sure that your manager and boss knows your accomplishments.
- Be a team player and occasionally lead. Pitch in when it’s crunch time and help the team to meet goal. Try to keep a positive attitude and avoid known complainers who sap morale. Without irritating your co-workers too much or your manager, take the lead on some projects.
Organize and keep your cash safe.
Once you cut your expenses and have some money, protect it. Keep the number of bank and retirement accounts. It’ll be easier to keep track of your money.
- For money that you may need in 5 years or less, don’t invest. Put the money in a money market fund or CD.
- For your emergency funds keep it in a high interest savings account. Ideally you should have 3-6 months of expenses in your emergency fund. Build up the emergency fund to the point that if you lose your job, you’re not immediately having a meltdown. Tax returns, inheritance money, unexpected gifts…..when you receive “extra” income, deposit it straight into savings.
Build a realistic budget.
- Track what you spend in two weeks. It’s hard to cut back if you don’t what your weak points are, so grab a little notepad and write everything you spend for 2 weeks.
- Withdraw from your bank’s ATM once a week. Take out money you need to eat, tolls, etc. If you run out of money, then make a peanut butter and jelly sandwich or bring leftovers for lunch. Do not go back until the next week!
- Use you cash, not credit cards. Don’t defeat the previous step by switching over to your credit card. This will help you to stop acquiring new debt, which in turn can drain your savings. National average for standard, variable cards is around 14%, so eliminating new debt will help you.
- Base a tentative budget based on what you learned the past two weeks. This will help you avoid a rigid or unrealistic budget, which will only frustrate and discourage you.
- Repeat. Keep working at this. You’ll probably work on it a few times until you get it right for your circumstances.
Automate your finances as much as you can.
- Set up free online bill pay with your bank. Most banks and credit unions offer money and time saving feature. Spend an hour setting this up with your bills, account numbers, due dates, and amounts, and you’ll only need a few minutes a month to keep it up.
- Take advantage of your company’s 401k program. Try to at least set aside enough money to receive the company match as it’s basically free money in your pocket. Look for low cost index funds to put your money in.
- Have a small portion of your paycheck transferred into an IRA account.Once your build up your emergency fund, eliminated your credit card debt, and have increased your income; funnel some money into an IRA. You want to still look for low cost index funds to put your money in.
What tips do you have on keeping your finances in check?
Photo Credit: MrVJTod
This post was included in the 189th Carnival of Personal Finance: Super Bowl edition.
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Couldn’t have said it better.
Taking stock of what you have and what you have coming up is the key to feeling in charge of your finances.
“Just a girl trying to find a balance between being a Shopaholic and a Saver.“
Great post! In this economic times it’s especially important to know where you stand with your finances — and have a plan for where you are going.
@Fabulously Broke: Thanks! Finances can seem intimidating, but if you do it little by little, you can succeed.
@Miranda: I appreciate the support.
I agree that budgets don’t have to be scary or complicated. Frugal Coast2Cost had a great radio show on budget just this week.
So much advice, can easily be broken down and expanded upon, which I’m sure you will. You have to know where you stand like you mention before anything. Without knowing your current situation, you can’t plan for a future one. That is step 1 and something people don’t realize. They may want to budget or change ways, but don’t fully analyze where they currently stand. People should step back and take an overview approach to their situation to help them better prepare for what needs to come next.
@Craig. Thanks, I’m going to expand a bit more, but I ‘m going to ask other personal finance bloggers i they have any helpful references. If you have any posts on career, organizing your money, or budgeting, please let me know.
@Green Panda Being new to the working world I could write a post on finding a job post college. Is that something you would be interested in having as a guest post?
@ Craig: Oh, yeah most definitely! I love guest posts
Or even if you have a post on your site, I’d link to it as well. I want to spread the love and knowledge.
I like the idea of automating finances because this is something that I started doing as soon as I turned 18. Granted, I don’t have a fortune saved but I am proud for starting my journey towards financial independence at such a young age. I set up 3 automatic payments: retirement account ($100 a month), savings (undisclosed), and emergency fund ($50 a month).
My biggest “tip” is to track every single penny, which I do with Excel spreadsheets. I could not begin to redirect my money effectively until I knew where it was going. Last year I added my credit card debt on the spreadsheet so I could see it dwindling with each payment. This year I added my mortgage and another loan that I have. I was a little hesitant to do that because I was afraid those big numbers would be a little daunting. As it turned out, I love it! After paying this month’s bills, my total amount of debt, including my mortgage dipped below $100,000. I find it pretty exciting to watch that number go down.
@Studenomics: Congratulations on setting up your bank accounts! Financial independence is a process, so you’re doing great. Thanks for sharing your story.
@SimplyForties: Wow, that’s fantastic. Did you make the spreadsheet yourself or did you have template? Awesome job either way. I’m happy you’re knocking the debt down.
@GreenPanda – Thanks! I made the spreadsheet myself. As a bonus, I’d never been that conversant in Excel, having always been a lover of Access, and making the spreadsheet do what I wanted it to do made me grow to love Excel. I love watching those numbers go down every month!
@SimplyForties: Designing your own Excel is fantastic. I had a spreadsheet for myself, but when we did a joint, he wanted something different. He’s so picky.
Good post with lots of good advice. However, I actually disagree with the “Use you cash, not credit cards” advice. I pay my credit cards in full everymonth. Using them gives me rewards points that I can cash out and I can keep track of exactly where I am spending all my money by just looking at the statements (without having to write anything down).
@Richer and Slimer: What I meant was don’t use credit cards as a back up if you spend your food allowance. It would man going over budget and putting it on a credit card which probably has a high interest rate.
Sorry, I should’ve been clearer with the tip. Thanks though for pointing out reward cards.
I definitely feel that knowing where you stand at all times with regards to all things financial definitely helps. It keeps a person organized and well prepared, especially when it comes to spending.
@Jason: It can be pretty surprising when you see exactly where you are financially.
Even when I use a credit card that I pay off every month (points) or a debit card (to make my 12 transaction for the interest bearing checking account), I still watch the budget. There have been studies that show people unconciously spend more with plastic. As long as you are alert and aware, you can stop yourself from doing that.
@threadbndr: So true! I think part of the problem is people don’t associate money with the cards. I know some people seem to forget it either comes from your checking account directly or you have to pay every month.
I found your site via Studenomics. Love your work!
I like what you say about solidifying your current employment. In order to find “real” financial security, you’ve got to be valuable in the eyes of the rest of the world, as they’re more then likely the ones that will be signing your pay check.
I posted about that recently too. Be valuable! Work hard! When layoffs come, your name may not be called!
Keep up the good work on the site.
@ Trevor Thanks for the support. Hopefully working hard and network smart can give you some protection in this economy. Even if you do get laid off, a good reputation and solid references can go a long way.
BTW, after reading your blog (love the post on resume tips), I subscribed. Hope to read some more wonderful articles.
Excellent tips. A lot of them involve sacrifice. But then again, tough economic times call for sacrifice. It wouldn’t be called belt-tightening for nothing. But with discipline and resolve, it’s not impossible to weather the storm.
This is a very timely post.
Nothing can unhinge your finances more quickly than a job loss. There are some specific steps you can take to shore up your finances if you’re worried about losing your job (and who isn’t, these days.
Check out my story, 10 Financial Tips to Prepare for a Layoff: http://www.creditfyi.com/How-To-Prepare-For-A-Possible-Layoff.htm
This is a great comprehensive list! The best piece of advice on here (and the one that everything else builds off of in my opinion) is to avoid new debt. Think of what you could do without the month-to-month obligation of credit card payments, car payments, etc. We just might be able to save enough month-to-month to buy the next item with cash…and the next….and the next. Avoid debt and we could have financial freedom where we are not under the constant jurisdiction of creditors.