Getting Control of Your Finances

Waqar Ahmad March 10, 2024

0 35 6 minutes read

Are you losing sleep over money problems? Do you spend a lot of waking hours “running the numbers” to see if you can pay all of your bills and make it until the next payday? Are you using your credit cards to buy such things as groceries and personal care items? And are those cards creeping up to maximum limits while you are only making minimum payments?

If this sounds like you, then your finances are out of control. You can continue to live like this, or you can decide it’s time to take action and climb yourself out of this hole. If you have chosen the latter, here is the help you need.

Table of Contents

5 Steps to Gain Control

This is a journey that will not be easy or quick but if you can reach your destination, you’ll enter the next years of your life able to enjoy them.

Here are steps that have proved successful.

Honestly Assess Your Current Situation

You’re going to have to look at what you are spending and on what, and how much debt you have accumulated. Even more important, you need to set some financial goals to work toward, both short- and long-term.

Let’s begin.

Make a List of Your Debts and Recurring Expenses

Make a List of Your Debts and Recurring Expenses

This includes mortgage, if you have one, car loan, personal loans, and credit card debt. Next to each one, list the interest rate and monthly payment.

Recurring expenses are those that you have every month – electric bill, car insurance, cable/internet, phone, health insurance, etc. Some, like utilities, you may have to give an estimate, but you should have a good idea.

Hold onto this list. You’ll need it later.

Track Your Spending for a Full Month

Preferably, begin at the start of the very next month and go all the way through the last day.

If you bank and pay bills online, you’re in luck. It’s all there for you, except for your cash purchases. If you don’t, you’ll have to use some other method. And you’ll have to make note of any cash transaction, no matter how small, on the go (like picking up that coffee on the way to work or running through a drive-thru for lunch). Keep those receipts.

Categorize the Spending

You will need to put each item into a category. These should be:

Living/Household: This will include your mortgage or rent, your utility bills, and other expenses to maintain your residence. For example, do you pay someone to mow your lawn? Do you have a pool or outdoor hot tub that needs maintenance (chemicals, etc.)?
Recurring Monthly: Go back to the list you made – car payment, credit cards, personal loans, cable/Wi-Fi, phones, health insurance, gym membership, etc. (Note on car insurance: If you pay this quarterly or semi-annually, divide that total by the number of months and list it in your monthly expenses).
Medical: This will include any copays and medications you have purchased – prescription or over-the-counter. Health insurance is already in another category.
Food: This is a separate category because it is one area you will be looking at later. It includes the amount spent on groceries, takeout, delivery, kids’ school lunches, and those coffees and drive-thru lunches. If you are really serious about this, keep your grocery receipts so you can analyze them later.
Personal Care: Do you go to the hair salon? Do you visit a spa? Do you get regular massages? What hair, skincare, makeup, etc. products have you bought this month?
Transportation Costs: How much did you spend on gas, tolls, and routine maintenance? If you use public transportation, what is the total cost?
Entertainment: List eating out, movies, concerts, fees for kids’ sports/activities, club memberships, etc.
Clothing: This will vary every month, but list what you spent this month.
Miscellaneous: Anything that does not fit into another category – beer/liquor, computer supplies, gifts, etc.

Now, total up all of these expenses.

Compare Income and Expenses

If your income is more than your expenses, you are surviving. If not, you’re underwater. You’ll need to cut expenses or find another way to bring in some more money.

But what about savings? Other than a 401K you may have through work, are you putting anything away for emergencies or some future goals? If not, that must be fixed right now.

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Where and How Can You Cut Expenses?

Every category from food down will be subject to cuts. Go on an austerity campaign.

Food: Where are you shopping? Are there discount groceries you should be using? What kinds of meals are you planning? Are you eating steaks and gourmet deli items? Are you a victim of impulse buys? If you have kept your receipts, you can easily see the items that are “wants” rather than “needs.”

Plan a weekly menu, make your grocery list, and stick to it. Buy cheaper cuts of meat and find recipes for them. Look for sales. Buy store brands.

Stop ordering takeout. Brown bag your lunches. Find cheaper snacks – popcorn, for example.

If you get serious, you can cut about 1/3 of your monthly food expenses. That money can go toward paying down debt or into savings.

Personal Care: Cut out all of the fluff and get down to the basics you need. Find a cheaper hair salon; stop the spa visits; do your own nails. And stop the impulse buys because advertisers say a product will change your whole life – it won’t.

Transportation: Can you carpool, rideshare, or use public transportation? We have such a love affair with our cars, that we spend way more than necessary for the independence they give. Here’s a radical thought. Does your family need two cars? An occasional Uber or Lyft is far cheaper than a second car. Think about it.

Entertainment: Cut it to the bone for now. Get Netflix. Livestream concerts. Invite friends over for a potluck or BYOB and snacks party. There are lots of ways to socialize that don’t involve big costs – you can even find your love for free! Click over here to try a free dating app.

Clothing: Some clothing costs are necessary -new work boots or uniforms, for example. But do you really need that new pair of jeans, jacket, or sweater you want? No, you don’t. Spend that money on lowering debt or building up savings.

Miscellaneous: Reduce the amounts you spend on gifts. If you drink and/or smoke, consider quitting or at least cutting back. Avoid buying gadgets because they are cool – you have other priorities now.

Reducing Your Debt

This will be one of the top priorities. Debt, with accompanying interest rates, can kill any plans you have for getting yourself back on track. There are two things you must do.

Once you have a figure from your cut expenses, earmark half of that toward your debt.

Prioritize debt payoff. Take the loan or card that has the lowest balance, and dump everything you can on it. Pay the minimum on everything else. Once that is paid off, hit the next one up. Dump what you were paying on the first one on it, plus the minimum payment. Continue with this strategy until your personal debt is totally manageable.

Now, the other half of what you are saving each month? Read on.

Build That Savings

Any bank will have a way for you to have an amount automatically taken out of your checking account and placed into savings. Or if your employer has a savings plan, have it taken out of your check before you ever get it. But you want the savings to be available for emergencies, so adding more to your 401K isn’t smart. That’s for later on.

Your goal is to have 6 months of expenses in savings. And if you use any of that, replace it ASAP.

Make This All a Game

Think of your journey as a game you are playing. Every win scores you points, and you give yourself a small reward. Once you get into this “game,” you’ll find it a bit of fun. And the other huge benefit? You’ll sleep better at night.

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