Are YOU Ready Take Control of Your Finances!

The New Year is a time for goals and resolutions. But about half way through the year you may feel that instead of taking control of your money, it's keeping control of you! I decided to give myself my own crash course in financial basics to help move me closer to my goal and Here’s a summary of everything I’ve learned about personal finance:

Track Every Penny You Spend -
The authors of "Your Money or Your Life" admonish readers to 'keep track of every cent that comes into or goes out of your life.'

[This is] the best way to become conscious of how money actually comes and goes in your life as opposed to how you think it comes and goes…This is the step that somehow makes the biggest impact.

It doesn’t matter how you track your spending — the most important thing is to do it. You can use a cash notebook, you can use an on- line tool like Wesabe, or you can use a piece of software like Quicken or Microsoft Money.

Whichever method you choose, stick with it. Make it a habit. Don’t fudge the numbers. Record your transactions as soon as possible. Most of all, don’t judge yourself. Tracking your spending is an exercise in data collection; it’s not the appropriate time to change your habits.

Develop a Budget -
After you’ve tracked your spending for a few weeks (or months), use the data you’ve collected to develop a budget. According to "The Millionaire Next Door", budgeting is one thing that sets the wealthy apart from the general population — 55% of millionaires keep a budget.

Start an Emergency Fund -
For years I lived paycheck-to-paycheck. I spent everything I earned. This worked well until something went wrong. And something always went wrong. Suddenly I’d find myself without money to pay for a car repair, or facing an expensive doctor’s bill. I financed emergencies with credit cards. After years of carrying debt, I finally paid off all these out-of-the-blue debts! It definitely helped that I found a way to make a lot more money with home-based business. But even making more money, it's important to follow all this great advice because it is very easy to spend more than you make, no matter how much money you make.

In "The Total Money Makeover", Dave Ramsey explains why he believes an emergency fund should come before anything else.

Get out of Debt -
Are you struggling under a heavy debt load from credit cards or student loans? Make it a priority to unload some of this this burden in 2009 and 10. When you're inundated with debt, you're basically working to pay the banks. So, make it a goal to only spend what you make. If you want more, make more. It's impossible to expand your current living situation if you're income doesn't expand. By paying down you're debt, you'll have all that money accessible to you.

If you have the mental discipline, you’ll save money by paying down your high-interest debt first. But if you’ve tried that method before and failed, consider using a debt snowball. Pay your debts starting with the smallest balance first. Here’s how:

Order your debts from lowest balance to highest balance.

With everything going on in the industry now, you can negotiate better interest rates. Call the banks and ask them for a lower interest rate or a payment plan.

Designate a certain amount of money to pay toward debts each month.

Pay the minimum payment on all debts except the one with the lowest balance.

Throw every other penny at the debt with the lowest balance.

When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.

The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the game. It’s not mathematically ideal, but it worked for me (and for many others!).

Open a Retirement Account -
If you’re young, you probably don’t think you need to start a retirement account. You’re wrong. No matter how old you are, now is the time to begin saving for retirement!

Spend LESS than you earn-
This is the fundamental money skill. It’s common sense, yet many people never learn do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending or develop a budget, but those steps aren’t completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers.

Automate Your Finances-
My current project is to move toward a system of paperless personal finance. Along the way, I’m learning the value of automating routine transactions. When you make things automatic, you remove the human element, making it more difficult for you to mess things up.

The classic example is overdraft protection. By tying your checking account to your savings account, you have a safety net if you bounce a check. But there are other ways this can work for you. For example, I’ve set up automatic payments with the gas company, the cable company, and my auto insurance company. I also make automatic investments to my retirement account.

Educate Yourself-
Knowledge is power. Personal finance doesn’t have to be a mystery. Read personal finance books and self-development manuals to empower yourself.

Take CONTROL of Your Finances Today!