A recent survey from Resume Now revealed that 17% of people said their biggest financial stressor was not being as disciplined about their finances as possible. With lives getting busier for many Americans, managing finances isn’t always a priority. You may find you do not always have the time or energy to handle your money correctly. However, the longer you put off managing your funds, the more challenging it can be to put things in order. Here are some simple tips for people who find managing their money daunting to help you start getting control of your finances.
1. Assess Your Financial Situation Realistically
Many people find personal finances daunting because they don’t know exactly what they have and don’t have, said Kyle Enright, a consumer finance expert and president of lending at Achieve. The reality is—as with most areas of life—that you need to be aware of what’s going on with your money. If you’re intimidated by the idea of money management, it’s likely because you haven’t assessed your situation realistically.
Start by understanding how much debt you have, including credit cards, student loans, and personal loans. This will give you a clear picture of what you owe and can help you prioritize repayments. Next, calculate your monthly outflows for fixed expenses such as insurance, rent, and your phone bill. Fixed costs are essential and typically remain the same every month, making them predictable and easier to plan for. Additionally, identify your variable expenses and spending on things like dining out, entertainment, and other non-essential items. Variable costs can fluctuate, so knowing these will help you find areas where you can cut back if necessary. Finally, determine your income from your job and any other sources, such as freelancing gigs or investments. Knowing your total income is crucial for budgeting and planning, as it sets the groundwork for your financial strategy.
2. Monitor Your Expenditures
The next crucial step is tracking your daily or weekly spending to identify areas for improvement. This practice provides a clearer picture of where your money is truly going and highlights areas where you can make adjustments. You can use apps or your banking app to automate this process and keep everything organized. Technology can simplify this step, making it less daunting and more manageable.
After a few months, regularly review your expenditure data to understand your spending habits better. This review period is essential, as it helps you identify patterns and trends in your spending that you might not have noticed otherwise. For instance, you might realize that you are spending more on dining out than you initially thought, prompting you to cook at home more often. “To gain a clearer picture of where your money is actually going, start tracking your spending regularly,” remarked Janelle Sallenave, the chief spending officer at Chime. Even taking just five minutes at the end of each day or scheduling a weekly check-in can make a big difference in staying on top of your finances. This simple yet effective practice can help you regain control and make informed decisions about your money.
3. Establish a Basic Budget
If you’ve been neglecting your finances, you’ll want to start by learning about budgeting and creating a simple one you can follow. A budget helps you to know what’s happening with your money, allowing you to make informed decisions. Budgeting should not be viewed as a restrictive tool that limits what you can do but rather as a spending plan that empowers you to take control of your finances. There are numerous types of budgets, so you can easily find one that suits your lifestyle and preferences.
Kyle Enright elaborates on budgeting: “At the beginning, it’s just a way to write down and know what’s coming in and going out. Once you have a handle on these basics, look at the budget as a tool to help achieve and do the things you want in life.” This perspective shifts the focus from restrictions to possibilities, making budgeting a positive and proactive process. The 50/30/20 rule for budgeting offers a straightforward approach—allocating 50% of your income towards essential expenses like rent, utilities, and groceries; 30% towards non-essentials such as dining out and entertainment; and 20% towards savings or debt repayment.
4. Set Minor Financial Goals
Setting small, short-term financial goals can give you a reason to take your finances seriously. These goals should be specific, achievable, and time-bound to keep you motivated and focused. For example, you might plan to cut out $100 from your monthly fixed expenses by reviewing and canceling unnecessary subscriptions this weekend. You could also set up your retirement plan contributions with your employer after putting it off for months. These small steps can make a significant impact over time and provide immediate benefits.
“If the goals are important to you, you’ll start to figure out ways to cut expenses or generate more income,” Enright added. Breaking down your financial goals into smaller, more manageable tasks can make the process less overwhelming and more achievable. Each small victory builds momentum, encouraging you to keep moving forward and tackling bigger financial challenges.
5. Automate Your Financial Processes
Automating your finances is another excellent way to gain control and reduce stress. Enright stressed the importance of taking the decision-making out of saving: “At most financial institutions, you can easily set up a transfer from checking to savings accounts.” Automating these transfers ensures that a portion of your income goes directly into savings, helping you to build a financial cushion without having to think about it. Most experts recommend saving 10% to 30% of every paycheck, but you should take some time to determine what you can realistically save based on your situation.
Sallenave elaborates, “Just like automating your savings, you can set up automatic payments for your bills to ensure you never miss a due date. This is a convenient way to stay on top of your finances and avoid late fees.” Automating both your savings and bill payments helps streamline your financial processes, making them more manageable and less stressful. This approach also reduces the risk of missed payments or forgotten savings, allowing you to focus on other aspects of your financial plan.
6. Check Your Credit Report
Your credit report is a crucial component of your financial health, as it affects your ability to get loans, rent an apartment, and even secure certain jobs. Enright noted that everyone can review their reports from the three main credit reporting agencies as often as once a week at annualcreditreport.com. Regularly reviewing your credit report helps you ensure that the information is accurate and that there are no mistakes or fraudulent activities affecting your credit score.
When reviewing your report, pay close attention to details such as payment history, open accounts, and any negative marks. If you spot any inaccuracies, dispute them promptly with the credit bureau to have them corrected. Ensuring the accuracy of your credit report can prevent potential issues when applying for loans or credit in the future. While credit reports are not the same as credit scores, the data in your report is used to calculate your credit score, making it essential to keep your report accurate and up-to-date.
7. Address Your Debt
A recent survey by Resume Now uncovered that 17% of people identified their biggest financial stressor as lacking discipline in managing their finances. With the hectic pace of life many Americans face today, organizing finances often falls by the wayside. It becomes easy to see why people might not always allocate the time or energy needed to manage their money properly. However, the longer you delay addressing your finances, the tougher it can be to get everything back in order.
Financial management doesn’t have to be overwhelming. Taking charge of your finances can start with small, manageable steps. Establishing a budget allows you to see where your money is going and helps you identify areas where you can cut back. Setting up automatic savings transfers can ensure that you’re consistently putting money aside, even if you forget to do it manually. Another helpful tip is tracking your spending, which can illuminate habits you might not have realized.
Creating financial goals, both short-term and long-term, can offer motivation and a sense of direction. It’s also beneficial to educate yourself about personal finance, whether through books, online resources, or financial advisors. These small steps can empower you to start managing your money more effectively and reduce the stress associated with financial disorganization. Remember, starting with simple actions can pave the way for greater financial control and peace of mind.
