Money is the current medium of exchange for services rendered or products acquired from someone else. Everyone uses it. It’s the way we get things we need and want. The money you receive for your work is considered income and when you use money to purchase items or services that’s considered expenses. When you acquire items for which you cannot make a total payment immediately, that is debt. Debt is not a totally bad word. It only becomes that when you get more debt than you can handle repaying over time. That’s when stress comes in. If you are tired of being stressed over money matters, it is time for you to get control of your personal finances.

The first thing you should do is write specific goals about what you want to do with your life and your money. Then divide these goals into short term and long term goals. Know that long term goals can be in progress while you work on the short term ones. Next step is to prioritize which goals you want to achieve first. Then create a plan to reach those goals. It will have many steps, the first of which is to get control of your budget. This will allow you to decide how to spend your money and to keep you focused on what is important to you. [1]

Tracking your expenses for a month and categorizing them will give you an idea of where your money is going. Divide them into fixed and variable expenses. Fixed expenses are a definite amount due each month, like a car payment. Variable expenses will need to be reviewed and are adjustable by making spending habit changes, like eating out. You can make the choice to spend more or less on these. Some expenses occur annually, semi-annually of quarterly. To fit these into a monthly budget, divide the amount due by the number of months between payments. You will set aside the necessary portion each month so you can pay it when it comes due.

So if you’ve spent last month tracking your expenses, you are now ready to set up a budget. This can be as simple as getting a dozen envelopes and writing down the category like rent or mortgage and putting the amount of money in it from your cashed check. Or you may decide to get a digital software program and use that to set up your budget. There are a variety of programs available. 10 of them are reviewed here and another one is Every Dollar. If you are doing online banking and use credit and debit cards, select one that will connect your bank accounts to it and will allow you to access the program on your mobile devices as well as from your desktop computer.

Now that you have a glimpse of the “big picture,” the next step is to pay your future self and build financial security by establishing an emergency fund. Start with the goal of $1,000. [2] A one month’s expenses savings will be next. This fund will create a safety net plus it will give you a sense of self-confidence and control. Use the remainder of your money to pay for current living expenses.

A budget plan is a moving target, so you must learn to be flexible. If you go over spending in one category or another, don’t give up. First review your spending. Do you need to readjust that category? It may take several months to get it right, just don’t quit.

Once you’re stabilized, the next step is to begin the process of getting out of debt. Make a list of your debts and include the minimum payment amount, the interest rate and how much you owe.  Include credit cards and personal loans, student loans and any money you owe family or friends. Then rank your debts in the order you want to pay them off. You can start with the smallest to largest or you can go by highest interest rate to lowest.[2] If you start with the smallest debt as your first payoff goal, make minimum payments on all other debts and focus the most money on the smallest one. When it is paid off, take that amount and add it to the minimum payment of the next debt on your list. As these debts disappear, you will feel the momentum. [3]To find extra money to pay off debts, you may need to cutback spending in some of the variable expenses mentioned earlier. Just stick to it, you can do it!

When you finish paying off a credit card, put it away. If you are charged an annual fee for the privilege of having it, cut it up and cancel it. Next month – what and why of insurance.


Billie Nicholson, Editor
May 2017

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