When it comes to money, many of us have picked up a few bad traits over the years – but luckily we all have the power to change. If you are saddled in debt, strapped for cash, and worried sick about your finances, the very first step you need to take is to organize your personal finances. Here are some steps you can take to organize your finances and sleep a little better each night:
Determine Your Net Worth
Your net worth can tell a lot about your current financial health, and helps you to plan for your financial future. Your net worth is the total of all your assets minus your liabilities. It’s the cash you would pocket today if you were to sell everything you own and pay off your debts. If you’re able to figure out this simple figure, you can then focus on creating a budget, set financial goals, track your spending – and take control of your finances.
Set Financial Goals
To set financial goals, you first need to know what you want to accomplish. Do you want to save money for a new car, for your retirement, for your child’s education, for a vacation, or for a house? Do you hope to pay off your debt, or do you want to build up an emergency fund? Spend some time figuring out what your financial goals are – big and small – and write them down. By creating a plan with clean goals and a specific timeline, you will know what you’re working towards.
Track Your Spending
Do you know how much you’re spending each month? If not, now is the time for you to find out. Track your spending for a month and see exactly where your money goes. Are you spending too much on coffee-to-go’s? Are you spending more than you can make? By the end of the month, you’ll know.
Create a Budget
Once you wrote down your financial goals and took a good hard look at your spending habits, it’s time to create a budget. The budget reflects how you want to spend your money. Prepare a budget worksheet where you collect all of your financial statements, record your incomes, create a list of monthly expenses, and make adjustments to those expenses.