As a former bank employee who has dealt a lot with everyday banking such as savings and chequing accounts, credit cards, loans, and mortgages, among other things, I have seen time and time again people who have lost all control of their finances or maybe never really knew where and how to start. I have to admit I myself have been in that same place more than once in the past. It’s not hard to have something happen and then all of a sudden your finances get away from you. It can often be difficult to take control of your personal finances. Learn how to take control of your finances before your personal finances take control of you.
This post does not contain any affiliate links and all information is intended information purposes only. I am not a professional, however, do have some experience working in the banking industry. Use the information provided at your own risk and always consult with your financial advisor before making any decisions.
What are personal finances?
So let’s start out with an explanation of personal finance. Most people will know this but it never hurts to have a reminder. Personal finance is quite simply the management of your money and assets through budgeting, banking, saving, investing, and planning. This may be for an individual or for a family. If you would like to read a little more about the definition of personal finance before you go on in this article I would recommend this Wikipedia article about personal finance (all outside links open in a new window so that you can keep reading this article).
What tools are there to help me take control of my personal finances?
Tools are a great way to help take control of your personal finances. I use them almost every day. I often use Excel personal finance templates such as monthly budget templates or other budget or tracker templates. There are many websites as well that have calculators such as the ones here. They have a wide range of personal finance calculators that can help you calculate your current personal finances and also help you plan for the future that are very easy to use!
Tips on gaining control of your personal finances
Gaining control of your personal finances can be hard, as I mentioned above, however, there are many things that you can do to help get control of your finances. There are lots of tips you can find by just doing a simple internet search, but they can be overwhelming sometimes. So let’s break it down into three easy steps:
- Start by recording your cash flow. Your spending and income. Spend a few months writing everything down and saving receipts.
- Categorize your spending into categories such as housing, transportation, insurance, food, utilities, clothing, personal care, medical/healthcare, household supplies, entertainment, gifts/donations. Add any additional categories as needed but before you do check carefully to see if there is maybe already a category they can go in that makes sense. Don’t put it there if it doesn’t as you might get confused. You can break these categories down further, for instance, utilities can be further broken down into electricity, water, garbage, internet, phone, cable, etc.
- You’ll also want to track money that you put into paying off any debt or into your savings, into education or retirement savings and put that under your spending as well. You want to see it go out as spending and back in later as income and back out again when you spend it on something such as tuition.
- Using spreadsheets or even just a binder and paper start a budget with the same categories as the ones listed above and set goals to keep your spending below for each category. Record your income (from all sources) and use the sheet to balance everything and see if you are within your budget at the end of the period. This will help you determine where you need to curb your spending and free up money for your savings or other places where you need it.
- Pay yourself first. Once you have a budget set up based on your current income and your necessary bills put money into your savings account first when you get paid, followed by bills. Setting up automatic payments can be helpful if you have a hard time remembering bills, however, if you are someone who has a hard time tracking what is coming in and out of your bank account and don’t use cash much if at all then it may not always be the best idea.
- Divide your budget up into either bi-weekly, bi-monthly, or monthly depending on how you get paid. It’s harder to keep track of a budget and follow it if you are setting up a monthly budget on paper or spreadsheets but are paid biweekly. This can get confusing and actually be detrimental in my experience with my own finances and now my family finances.
Plan for the future
- Here is one of the most useful areas to use calculators when planning for the future and/or considering something. So if you are considering getting a credit card for instance. Do your homework starting with your own current bank and use calculators to help you determine both if you can afford the payments as well as which card is best for you.
- Set goals. Are you wanting to purchase something big or go on vacation? Use the calculators located here to help you save, determine interest, etc. Want to know if you can afford a mortgage?
Saving money is an important part of taking control of your personal finances. There are lots of things you can do to save money. Here are some of the ways that I find helpful when it comes to saving money.
- Coupons. In my post Tips & Tricks for Using Coupons to Save Money I go over a number of ways to use coupons to help save yourself money on both everyday things as well as one off’s or big purchases.
- Pay yourself first. As mentioned about budgeting is an important part of getting control of your personal finances (that goes with business as well) and when setting up your budget you should figure out how much you can throw into your savings each month and make a habit of paying yourself first.
- Use a combo of high-interest savings accounts and an everyday savings account to utilize the interest that you can earn. Start off by putting money every two weeks (or weekly or monthly, again depending on how you get paid) set a small goal. For instance if you are putting in $50 a month then set a goal of about $250 and when you reach that move $200 of it over to the higher interest account and save it for the long term. When you have built your short-term account (the lower interest one) up to where you’d like it then you can add the rest directly to the longer-term (higher interest account). This allows you the lower interest account for emergency or short-term use and the higher interest account (because they typically have a savings period) as a longer-term goal (ie. car or mortgage downpayment or some other large purchase).
- I make it a habit to never pay full price for anything unless I absolutely have to. I wait for a sale, find a coupon or buy it second hand depending what it is.
I hope you found this information helpful and useful. I know how daunting getting control of your personal finances can be. It can be hard, frustrating, and confusing, but it doesn’t have to be. With a little time and effort and the right tools, most of us can do it. Don’t be afraid to ask a trusted friend or family member for help. You’d be surprised at the tips and tricks you might be able to get from some of them. Once you get the hang of it if you have kids, start early teaching them the basics of finances. This article from Forbes.com has some important money lessons to teach to kids.