First Step to Financial Control
If someone dropped you in the middle of a forest and told you to find the ranger station to get home, it would kind of suck.
You wouldn’t know the right direction to go and if you started walking you would have no idea if you were making any progress or if you were going backward.
Budgeting and getting your finances together is the same way.
If you randomly decide to start paying your debts lowest to highest without knowing if you even have ten extra dollars a month to throw at that debt, you may dig yourself deeper into debt or find yourself not being able to afford payments on other bills (like the electricity) if you just start spending more money without knowing how much you have to spend. Even if the spending is for awesomeness like debt repayment.
Making a Map
If you were dropped in the middle of the forest with a map, you could figure out which way that ranger station was and get your happy ass out of the forest before you were eaten by mosquitoes and other scary forest creatures, right? (Even if you don’t know which way North is…if it was get to the ranger station or become Cheetah food…I have total faith in you that you could figure it out.)
Your finances are your forest, no one else’s. That means the best person to make a map of the area is you!
Even better? The very first step involves one piece of paper, one pen/pencil, and your memory – for a start.
Make one column called Income and one column called Expenses on a piece of paper and start scribbling. Your mortgage/rent, electric, gas, cable, phone, tv. Don’t play the “I don’t know how much the bill is” game with me, either. You can look it up online or make a good guess or check your bank records. It doesn’t have to be exact to start with…but you have to have some idea.
If you find you have to keep looking things up because you have no idea how much your bills are – that means you’re doing the right thing and this mapmaking is totally in order.
Now get your income down. Everything counts! Do you get $4/mo. from your blog? Add it! Figure out where every penny that comes into your house comes from and write it down.
The Goal of the List: Are your expenses more or less than your Income?
Knowing where you are right now can really help you understand if you are stressed about money because you don’t have enough, or if you are stressed about money because you could be doing better.
Not having enough money is an emergency situation that needs to be looked at and solved immediately. Either by drastically reducing expenses or getting another job or a more reliable income from home.
If you have enough but aren’t sure where the extra is going, start keeping track of how much you’re spending at the gas station, at fast food or restaurants, at the bookstore…you know, the money you spend when you aren’t paying attention. See what expenses you can reduce while tracking your spending to balance out and keep that extra money in your hand, not down the tubes.
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