It's time to clean up your finances. Whether you want to get out of debt, develop a budget, or find the best rate on your next loan, these 5 steps will help you become a better financial steward.
1. Know where you stand. (Be honest.) For the next 30 days, record your income and expenses. Here's a little worksheet to help you out. Make a list of all your debt. You can use The M Plan form to get started.
2. Determine needs vs. wants. Review your income and expense worksheet and beside each line-item, mark it as a NEED or a WANT.
- NEEDS: Do you have the best price? Are you paying unnecessary fees? If your checking account has a $5 monthly maintenance fee, switch to a checking account that doesn't charge maintenance fees, to save $5 a month.
- WANTS: Can you eliminate this from your budget? Get a better price?
3. Dust off your savings account. Are you saving every month? Experts suggest creating a "just in case" savings account:
- First goal: Saving $1,000
- Second goal: Save 1 month's of living expenses
- Third goal: Save 3 month's of living expenses
Not sure which dividend-earning account to use? Compare savings accounts, certificates, club accounts, and money markets accounts to determine which is best for you. Each come's with its own set of benefits. After reviewing your income and expenses, commit to putting X dollars automatically into your savings account each pay period.
4. Get back in the green. Can you consolidate debt or refinance some of your loans at a lower rate? Shop three financial institutions for better rates to help pay off debt faster and be more affordable in your budget. Example: Entrust Financial CU offers a Knock Down Your High Rate promotion: If we can't beat your rate, we'll give you a $100 Visa Gift Card. Prioritize your debt from smallest to largest balances and then work to pay off the smaller debt first. Once complete, apply that payment to the next smallest balance, and repeat. It goes faster than you may think!
5. Take action. Work your new budget. If you need an accountability partner or some coaching, meet with one of Entrust Financial CU's Certified Money Coaches for a free one-on-one session. Adjust when necessary. There are tons of resources out there to help you monitor your budget, such as Quicken, Mint.com, You Need A Budget (YNAB), or a simple Excel spreadsheet. Celebrate your successes - as little as they may be. Pay off a loan? Treat yourself to a fancy dinner. Save $1,000? Take a day off from work "just because."