Six Steps to Get Your Finances on Track
March 20th, 2017 by Victoria Hampton

Assistant Editor Justin Cupler works at The Penny Hoarder offices. The personal finance website has attracted more than 6 million active subscribers.
Photo by Sharon Steinmann/The Penny Hoarder

Take control of your money instead of letting your money control you

It is easy to talk about personal finance, but how do you take this talk from passive to active? Here are six steps to help you start your financially conscious lifestyle.

Step One: Financial Fire Drill
Before you can start saving, you have to understand your financial situation.

“First, figure out where you are financially,” says Teresa Mears, executive editor of Living on the Cheap. “What is your income after taxes and what are your fixed expenses every month?”

Assessing your monthly expenses helps you distinguish between monthly wants and needs. This amount does not include luxuries such as cable, entertainment and eating out.

Step Two: Create a Budget
Budgeting means assessing how much you need to spend on monthly expenses such as rent/mortgage, car, child or pet care and groceries, and establishing a place for money left over.

“You have to really look at how much you have, your earnings and how much you can afford,” says Karrie Truman, creator of Happy Money Saver blog.

Groceries can be a big budget breaker, says Karrie.

“Often times food is the No. 1 huge budget breaker because everyone is on the go and coming home tired around dinner time,” she says.

Instead of ordering a pizza or going out for dinner, this mom of four encourages people to coupon to help with the expense and prepare freezer meals for easy dinners at the end of the day.

Step Three: Cut the Fat
Once you have established a budget, address the monthly luxuries you could do without.

“Cut everything that you don’t need and can live without,” says Justin Cupler, assistant editor of The Penny Hoarder. “If you have a Netflix account, but only watch once a month, or have a car you’re paying on, but only drive two times a week, start cutting those expenses and you could save several hundred dollars a month.”

Step Four: Save
Whether it is a savings account, 401(k), IRA or mutual funds, everyone should be saving for the future. Saving every month can be as easy as “set it and forget it.”

“Automate your savings,” says Justin. “There is Acorns, Digit and multiple other apps that take money and stash it away for you.”

Acorns monitors your bank account and automatically invests the change from your daily purchases into an investment portfolio of your choice, from moderate to aggressive.

Digit connects to your checking account and analyzes your spending habits, bills and deposits. It then determines how much money you can afford to have transferred into a savings account every two to three days.

Both apps are federally insured and protected.

Step Five: Change Your Financial Mindset
Paying off debt and getting finances in order takes time. Your financial mentality plays a big role in your success.

“There is no shame in using your money wisely,” says Teresa. “Find happiness in making plenty of money instead of spending on a daily latte. Maybe save for vacation or your children’s college. Save for things you really want to do. You want to be the one controlling your money, not money controlling you.”

Step Six: Reward Yourself
As you move toward your goal of living a more financially conscious lifestyle, save for events and vacations.

While this may be ingrained into your financial plan every year, Gary Foreman says saving while you are young leads to greater adventures later in life.

“Sacrificing a little bit early on in your life means the reward later on is so much greater,” says Gary. “There were times my wife and I sacrificed in our 20s, which lead to opportunities later that we wouldn’t have had if we hadn’t.”

When it comes to taking control of your money, it is an active process that should be given priority every month.

“Start now,” says Justin. “Don’t start next month. Start today.”