As January comes to an end, most of us have all of our tax forms rolling in, and it’s almost time to start getting everything in order before the tax man comes calling on April 15. While you’re busily gathering receipts and W-2s and documentation from the bank, you might be overwhelmed at the state of your finances in general. I know that once the credit card bills are in from December, I often feel a bit overwhelmed myself! Here are some tips on getting your finances under control as you work on organizing this part of your life:
- Take advantage of all of those saved receipts, and go through them in order to see where your money is going. Some of your fixed expenses, like the mortgage and your car payment, you’ll already know about, but other money spent might come as somewhat of a surprise. Did you have any large medical bills, home improvement bills, or other unexpected expenses that threw you for a loop last year? Sometimes these sort of things can help you to understand where all of your money went, and many of them are tax-deductible, so keep those receipts!
- Make a pledge to use February as the month that you will track your day-to-day spending. It is very difficult to make a budget if you don’t know exactly how much you are spending, and on what. Carry a small notebook and write down everything that you spend. Ask your partner or spouse to do the same. It’s tedious, but it’s only for one month!
- Begin to make your budget. Make sure that you factor in the money that you spend on gasoline and groceries. If you find that you’re spending too much on incidentals, such as coffee on the go or birthday gifts, then try to find ways to curb that spending. A new travel mug might make carrying coffee from home easier, for example. Add up all of your fixed and variable expenses and make sure that you have some money left over at the end of the month. If you don’t, do more tweaking.
- Financial guru Dave Ramsey recommends paying down your debt with what he calls a “debt snowball”: Pay the minimum balance on all of your accounts except for the one with the lowest balance; on that one, pay extra. Once the smallest one is paid off, begin tacking that amount on top of the minimum payment of the next-smallest bill until it’s paid off. Continue in this fashion until your debt is paid.
- Create an emergency fund, if you don’t have one. If small crises, like a damaged car tire, an unexpected dental copay or a leaky hot water heater, make you panic because you don’t have the funds to cover them, having an extra $1,000 or $2,000 in the bank that you can pull out in case of emergency will give you peace of mind. If you can squirrel away even $100 per month, you can have this built up in a relatively short period of time. You can build it even more quickly by temporarily suspending all non-essential spending and funneling all of the money saved into your emergency account. This type of saving can be tiresome, but it’s only for a short period of time.
If keeping your financial health under control is something that you have struggled with, why not make next year your year to finally make and stick to a plan?
Do you have any great tips for taming your money monster?