Organizing Your Finances

If you have a mind set on getting your finances in order, you need a plan. Simply saying that you want to get them under control isn't going to get you very far. But luckily, it's not all that difficult to organize your finances. Here's a good roadmap to get you started.

Step One - Get Your Credit Report

The first thing you should do is to order a copy of your credit report. Without it, you would be like a person operating heavy machinery in the dark! (If you don't know what a credit report is or how to get it, see our articles entitled What is In a Credit Report and How to Get A Credit Report.) Once you see what is on your report, you will be able to better understand what you need to do to get it into good shape.

Step Two - Set a Budget

Next, you should sit down and look at all of your monthly expenditures and bills, and then set a realistic monthly budget. In order to do this, you'll need to have your goals clearly in mind. Do you want to pay down your debt? Purchase a home? Take a luxury vacation?

All of these goals should be attainable, if you keep them in mind when setting your budget. And then, every time that you are tempted to go over your budget, you'll simply have to ask yourself if the thing you are considering purchasing is more important than your goal.

Step Three - Keep Track of Expenses

Now, you'll need to make certain that always know how much you pay for each category, and when your bills are due (so you don't incur any late fees). To do this, you should create files for each of your credit cards, loans, ATM card, checking account, and any other means of payment that you have. This will allow you to see in black and white each month where you money is going.

Step Four - Save, Save, Save!

In addition to getting out of debt, you'll need to start to think about your future. You should put aside some money every month as a savings. It doesn't matter how small you start, you need to get in the habit of saving your money instead of spending it. If you can only start with $20 per month, at the end of six months, you'll have $120.

Step Five - Pay Off Your Highest-Interest Debts

Start eliminating your debt by paying off your highest interest cards and loans first. For instance, if you have a personal loan at 8 percent interest, and a credit card at 22 percent, you should put all of your available extra money toward the credit card first, and then once that is paid off, you can start with the personal loan. This will allow you make the most of your money.

Step Six - Eliminate Late Charges

The final step in the process is to make sure than you eliminate all late fees in your life. Imagine that in one month you were late on a credit card bill ($20), were late returning three videos ($6), were late with your electric bill ($10), and didn't pay your car payment on time ($15). That would mean that for that one month, you spent $51 more than you had to. That's $612 per year!

Summary

Start organizing by getting a copy of your credit report
Set a budget and stick to it
Keep track of payments and expenses to make sure you stay with your budget and avoid late charges
Start saving as soon as possible
Pay off your debts with the highest interest first, then work your way down until your debt is eliminated

Now that you now how to start getting your finances in order, take a look at the details of Setting Up a Budget.