6 Steps To Getting Control Of Your Personal Finance

Are your personal finances stressing you out? If yes, you’re not alone. It’s normal to worry about money and financial security. In fact, money is the top cause of stress for Americans, according to Northwestern Mutual’s 2018 Planning and Progress Study. Worrying about money can be physically detrimental to your health as well as your pocketbook, contributing to lost sleep, migraines, ulcers, high blood pressure and more.

What can you do? These 6 steps can help you better understand exactly where you stand financially, give you confidence that your personal finances are under control and help you plan for your future. Good stuff.

Step 1: Decide That You And Your Financial Present and Future are Worthwhile
Coming face-to-face honestly with your financial reality can be stressful and even scary! But you are worth doing it, even if it’s hard.. It is worthwhile to live through the anxiety, fear and discomfort that comes with a clear financial reckoning because you deserve to build a positive financial future. Think of it like going working out – yes, it’s hard and sometimes unpleasant, but the pay off is literally worth it! Knowledge can be so empowering.

Step 2: Create and Use A Budget
Creating and using a budget is probably the most important step to improved financial well being. A Gallup poll showed that only 32% of American households use a detailed monthly budget – and that means that almost 2/3rds of households are not. Creating and using a realistic, detailed budget means that you are much more likely to use household resources wisely and avoid financial surprises.

  • Not sure where to start? This article has a great overview of budgeting basics.
  • You can use easy, free, customizable budget planners like this one.

Step 3: Plan for Emergencies
Emergencies are to be expected, unfortunately. Whether your son fell at the skate park, your dog got cancer, your basement flooded, you’re unexpectedly unemployed or your spouse needs significant dental work, you’re going to be out a big chunk of money. The best way to handle expensive emergencies is to anticipate that something are going to happen and work on steadily building an emergency fund.

  • How much money should you have in an emergency fund? This article provides a great overview of building and using emergency funds.
  • Can you use your emergency fund for non-emergencies? Of course you can. An emergency fund can be tapped for minor as well as major expenses. But it can’t help you if you drain it so only tap into it if you absolutely need to.

Step 4: Build a Big Picture Understanding of Your Finances
Budgets provide a close up, in-the-moment picture of your finances and are an important first step. But monthly or even yearly budgets don’t give you a long term, big picture view of where you are financially headed over a multi-year period.

  • Start by building a list of events and expenses you expect to happen like paying for college, weddings, retirement, purchase of a home or car, starting a family, long-term care, and death.
  • Identify a target date of when this event or expense is likely to occur and how much it might cost.
  • Build these key events or expenses into your monthly budget and keep track of your progress of saving for them.

Step 5: Use Debt Wisely
Debt has its place and not all debt is bad debt provided you can pay back what you owe in a timely way. Take a moment to evaluate whether any new debt that you’re considering will work for or against you before taking it on.

Step 6: Develop Support for Your New Financial Journey
Know anyone who ‘starts’ new goals far too often? We all do! It’s far too easy to promise yourself that you’re going to make change happen than it is to actually do it. What can help you be successful? Personal accountability and a support network. Finding a mentor, taking a class, building scheduled times into your routine to focus on your personal finances, reading books, listening to podcasts and hanging out with people with shared goals can be exactly what you need to stay on the path to financial well being.

Remember that not all stress is bad stress – and if a little stress helps you leave your financial ‘head-in-the-sand’ behavior behind you and motivate you to begin embracing financially awareness and responsibility, then it is worthwhile! You deserve to be the master of your financial situation rather than the victim and deciding to set up positive habits is the key first step. May you finally take control of your financial future!

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