4 steps to finally take control of your finances

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You’ll be glad you made the effort once you don’t have to worry about money.


Key points

  • Taking control of your financial life can give you peace of mind.
  • There are some simple steps that will help you get control of your finances.
  • These can include budgeting, creating a debt payment plan, and making smart savings decisions.

Getting control of your finances can have numerous benefits. You can accomplish important goals, reduce your chances of ending up in credit card debt or dealing with your current debt forever, and have peace of mind knowing you’re prepared for whatever life throws your way.

But while there are benefits to managing your money effectively, it can be hard to know how to make your funds work better for you. The good news is that there are only four steps you need to take to finally take control of your finances for good. This is what they are.

1. Take stock of your situation

If you want to take control of your finances once and for all, you need to know where things stand when it comes to your money. By taking a hard look at what you’re spending, how much debt you have, what financial goals you’re looking for, and what you need to do to achieve them, you can move forward with building a solid plan.

To take stock of your situation, you should:

  • Make a list of all the debts you owe, along with the interest rate and the outstanding balance.
  • Track your spending for at least 30 days to see where your money is going.
  • Look carefully at how your spending matches your budget, if you have one.
  • Review the financial goals you’ve set and see if you’re on time to achieve them.
  • Make a list of your assets, including savings.

This will give you an overview of your current financial life so you know what changes, if any, you need to make.

2. Make a budget

If you don’t already have a budget, making one is crucial to taking control of your finances. By developing a budget that you live by, you can ensure that you are prioritizing your goals and spending money on things that add the most value to your life.

Your budget will serve as the foundation for the rest of your financial plan, as you can make sure you’re putting aside enough funds to do important things like pay off debt and prepare for a secure future.

3. Create a debt payment plan

If you’re in debt, chances are you want to pay off a lot of what you owe. Paying off certain low-interest debts with long payment terms, like home loans, is often not the best idea. But if you have high-interest debt, like credit cards or payday loans, you’ll want to pay it off as soon as possible.

To decide which debts to focus on paying off, consider what your return on investment will be. If your interest rate is 3% (like on a mortgage), then your ROI is limited to the interest saved. Since you can earn more than 3% with other investments, debt should not be included in your prepayment plan.

For debts you want to pay off, focus on paying off those with higher interest rates first. Pay the minimum on all your outstanding obligations, then send as much extra as you can toward your most expensive debts until you pay them off in full.

4. Maximize the value of your savings

Finally, you’ll want to make sure you’re saving adequately for the future. This means you should have specific savings goals, including investing for retirement as well as for large purchases like a house, home maintenance costs, or vacations. You need to know how much to invest each month to achieve each goal on your desired schedule, and ideally, automate contributions to your investment accounts so you can reach your goals on time.

You’ll also want to make sure you have the right accounts for each type of savings, including a high-yield savings account for your emergency fund that should be affordable, as well as tax-advantaged retirement accounts.

By following these four steps, you can take full control of your finances, ensure your money is used wisely, and be on the path to a more secure future.

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