Five Steps That Will Change Your Finances

Five Steps That Will Change Your Finances

Do you ever feel like your paychecks are gone before you even get them, and you have no idea where they went? Or maybe credit card payments have taken over your life and you feel like you can’t even get ahead. Whatever your situation, there’s no better time than now to take control of your finances. Here are five things you can start doing today that can change the way you handle money.

1. Create a budget. It’s imperative to have a plan for your money. Start with a zero-based budget, meaning every dollar you make is assigned a category (food, housing, gas, etc.) until you have zero dollars left. If you’re married, make sure you sit down and do this together with your spouse. Having a budget in place is very liberating – it allows you to see where each dollar goes and can show you where you’re overspending or underspending.

2. Start paying off debt. Debt is always a burden. It prevents you from saving money because you’re making payments to someone else instead of yourself. It also hinders your ability to invest and give. Add up your total debt, excluding your mortgage. If the total is greater than 50 percent of your gross income, you probably need to sell something, whether it’s a car, boat or something else.

3. Build an emergency savings account. A job layoff, medical emergency, car repair or anything else that pops up is far less stressful when you have money in the bank to pay for it, instead of living off of credit cards.

4. Check your insurance policies. Not having adequate coverage or the right coverage could cost you. For example, if you live in an area prone to flooding flood insurance is a necessity, as this past summer’s rains proved.

5. Adjust Witholdings. If you’re expecting a big tax refund this year, adjust your withholdings so you take more home each paycheck. Otherwise you’re giving the government an interest-free loan each year when you could put that money to better use paying off debt, paying expenses or funding your emergency savings account.