Written By Tejas Ajmeri
Edited by Ranelli Williams, CPA, MBA
Managing money is one of the most difficult aspects of any adult’s life despite its simplicity. Without any financial knowledge, supervision or mentorship, it can become quite easy to lose control of your finances. If you, or someone you know feels as though they have lost control of their finances, then there is no need to panic. Being in debt, having trouble paying bills, or having trouble collecting enough funds to purchase the item that you want can lead to frustration, but there are steps that you can take in order to have a better understanding of your finances, and how to manage them better.
Evaluate your Income & Calculate your Expenses:
The first step to gaining control of your finances is by understanding how much you’re receiving, and how much of it you are spending on a weekly to monthly basis. It is important that when doing so, you take into account every single thing that puts money into your pocket and takes money out. After you’ve done so, determine if you need to cut down on spending for certain things, and create a spending plan (talked about later in this blog) to help manage your finances more properly.
Start an Emergency Fund:
Many people shake off the idea of an emergency fund because they feel that they don’t need it. To be sure, ask yourself, “If an emergency were to occur right now, would I have enough funds to cover it without financially restricting myself?” If not, don’t be ashamed, because you can start building one right now!
An emergency fund is literally money put to the side for emergency purposes. This emergency could be the loss of a job, being involved in a car accident, home repairs, or literally ANYTHING else that you would not expect to happen and have to pay for. An ideal method to develop your emergency fund is to gather around three to six months of what you would pay in monthly expenses.
In order to achieve that goal, try to put at least five percent of what you make per week towards your emergency fund. Of course, the more money you put into it, the quicker you would reach that goal of gathering enough money to pay for up to three to six months in expenses, but do not feel the need to restrict yourself of any financial flexibility that you may have because of it. Take a slow approach of putting away five to ten percent of your revenue weekly in order to gain enough to cover a month, and then continue working up to the goal mentioned before.
Create a Spending Plan:
Organizing and managing where and how you spend your money is an essential step in gaining control of your finances. Organizing a spending plan whether it be on a weekly or monthly basis will help you understand if and where you were overspending your finances. When building your spending plan, you must take into account EVERY essential thing you spend your money on. Everything from your mortgage, to hobbies, to your gym membership must be accounted for within your spending plan.
If you are having trouble creating a spending plan, there are apps and websites that you can use on your smartphone to create your spending plan! Mint and Dave Ramsey’s Every Budget Dollar Tool are great applications/websites to help form a spending plan. In Mint, you can customize your spending budgets for specific categories, in order for the application to track how much you’ve spent in certain areas, and will notify you when you’ve reached the desired amount of money that you wanted to spend in that category. It is easy to use, and better yet, it is free!
Stay on Top of Debt:
Debt is the burden that no one want’s to face, but have to take ownership of. Whether it be student loans, or car loans, it is important to keep up with debt as you can be charged more money for failing to make a payment, and other legal action. In order to avoid any of that from happening, make sure you abide by the agreements that were established, and pay off the minimum for any credit or debt payments that you owe. And if you really want to get rid of your debt, put extra money to the side to make a payment in advance! Not only will you not be bothered by that looming payment, but you will also be able to put more money towards the next payment, helping you get one step closer to eliminating your debt.
Hire a Financial Coach:
Hiring a financial coach can help you or anyone else regain control of your finances. Some people resort to hiring one if they do not have the time to organize their finances themselves, or simply have trouble understanding them. However, with the help of a financial coach, either of these issues can easily be solved, and will help you get back on your feet when it comes to your finances.
I would be happy to help you in this area. As a Certified Public Accountant and Legacy Building Catalyst, I help faith-based entrepreneurs and couples master their money as they work towards building a strong financial legacy. Contact me at firstname.lastname@example.org or call my office at (570)-269-5324.