The Ultimate Guide to Take Control of Your Finances

If your finances are controlling you but you want to control your finances, start here.

I have a few questions before we can start taking control of our finances.

  • Are you unsure how much you are making and how much you owe to your credit card gangs, mortgage sharks and other money munchers?
  • Are your credit cards maxed out?
  • Only paying the minimums on them?
  • Or have you stopped paying them all together?
  • Is your savings nonexistent?
  • Are your student loans casting a cloud on your financial future?
  • Have you lost sleep because of money nightmares and woes?
  • Are you fighting with your partner about money problems?

If you answered yes to more than one of those I am begging you to keep reading.

We are going to take a long, hard, probably painful look at our money situations. If you are feeling overwhelmed and out of control, I want you to walk away from this knowing that I got your back and we are going to get through this together, with a plan. We are adulting now and adults have plans.

We have to figure out our net worth.

Fancy speak for comparing how much we earn versus how much we owe.

Take five minutes to gather all credit card statements, receipts for cash purchases (just the big purchases) for now, 100 bucks or more) and bank statements. You will also need pay stubs or direct deposit slips. This includes the same information from your partner. You need a picture of your whole financial life. If you have any other documentation of purchases, expenses, or income grab those too, like recent statements for your IRA, 401(k), or alimony or child support payments.

Organize them into piles according to whether they are income (asset) related, meaning money you made or received; or expense (liability) related, meaning money you spent, or will spend.

A liability is something that you owe somebody. Mortgages, car loans, and credit card balances are all liabilities because even though you haven’t paid them off yet, you are obligated to pay them off. It is money that you will spend over the course of time to pay back what you have borrowed.

A list of liabilities includes: what you owe on your house, what you owe on your car, credit card balances, student loan balances, personal loan balances, outstanding medical bills, and back taxes.

An asset can be many things and are slightly more complicated. Try to think of assets as something that you use to bring in money now or in the future.

A list of assets includes: annual income, money in your checking and savings accounts, alimony and child support received, balance in 401(k)’s, IRA’s and other investment accounts, as well as what you paid for your house and what you paid for your car.

Cash brings in money in the form of your income. Homes and some nicer cars can increase in value and bring in money if you sell them for more than what you bought it for. Stocks and bonds can increase in value and bring in money if sold for more than what you paid for them.

Add up all the totals from each category. Now subtract your liabilities from your assets. That number is your net worth.

A number bigger than zero is a positive net worth. This means you earn more than you owe. However, it doesn’t automatically mean all your finances are in order. Younger people such as myself for example, who don’t own a house or a car, but has some student loan and credit card debt can have a positive net worth and still struggle paying bills every month.

While net worth is not the end all be all of the numbers, this is one tool in our arsenal to get back on track. One piece of the puzzle in place to help us see the bigger picture of our financial situation.

Why are we doing this?

It is so incredibly important that this step happens first and as accurately as possible so that we can see exactly what we are making and exactly where it is going. We can’t even begin to make a plan for debt busting if we are clueless.

How did your numbers look?

Better or worse than you thought?

Most of us are probably in the negative or just barely holding on with a small positive net worth. Either way that was the biggest first step towards taking control of your finances and we did it! If you fall into the barely holding on group, you have taken action before things got dire, but don’t be too proud yet. That means you still have work to do. Negative net worths and barely holding onners, onward!

Budget, Ultimate Finance Guide, take control of your finances

We have to track our daily spending… every day… for a month.

Every time we swipe our cards, use apple pay, cash, Venmo, Zelle, PayPal, whatever, it has to be written down and recorded.

When you get your morning coffee, record it. Buy a snack from the vending machine at work, record it. Pay your phone bill or your rent, record it. It’s the more detailed daily version of step 1. Again, we can’t start debt busting if we are clueless, so we have to know for sure where our money is at all times.

Equally important, in my opinion, is to know not only where and what we are spending but WHY we are spending.

For sure, I am an emotional eater. When I am stressed or feeling a little down my first thought is to go get a fancy coffee and a pastry. Being aware of why we spend can help us avoid or work through the situations that cause us to want to spend. If we know that when we are stressed we spend money we don’t need to spend, we can become aware when the situations are happening and reroute them.

Now when I’m stressed I can think, “Oh, I’m going to spend money because I’m stressed. I don’t want to do this so instead I’ll go for a short walk and calm down, or call my grandma and say hello.” Then I don’t spend money unnecessarily.

Be diligent about tracking every penny. We are coming back to this at the end of the month and this all will be for naught if we don’t have accurate information to work off of. You can do it! I have so much faith in you!

Figure out our credit score and get all of your credit reports.

There is a difference between your credit score and what is on your credit reports. They are separate things that don’t come in a package deal.

Your credit score refers to your FICO score. This has become the main way banks and jobs analyze your creditworthiness. It is as if someone followed you around your whole life and recorded all your financial information. Things like if you pay your bills on time, if you are over your credit limit, if you have too many open accounts, or no open accounts at all and then reported them to a teacher and they gave you a grade. That grade is your FICO credit score. It is the total creditworthiness of all your financial decisions ever.

Scores range from 300-850.

Under 580 – poor credit

580-669 – fair credit

670-739 – good credit

740-799 – very good credit

800-850 excellent credit

The range you are in effects whether you get approved for loans and what the interest rate is going to be. The higher the score the more likely to be approved for the loan and to be offered the lowest interest rate on that loan.

We want our scores to be the highest they can be. Just remember, everyone starts from 0 with credit scores. They can always be improved.

Seriously, after all the number crunching you guys have been through, this step is a breeze.

How to Find Your Credit Score

There are a couple of ways to get your paws on your credit score.

FICO open access made it possible for companies to offer free credit scores to their consumers. For example, credit card companies like Discover, American Express, CitiBank, and Chase all offer free FICO scores on their websites if you have an account with them.

I have a Discover, Chase, and American Express card and they all post their FICO scores proudly and prominently in the account summary page.

If you don’t have a card that has access to FICO scores these sites will show you your credit score.

My personal go-to is Credit Karma.

https://www.creditkarma.com/auth/logon

Credit Karma is a fast, easy and free way to check your credit score and get up to date reports on your credit activity. The score here is based on the Vantage score. It is similar to the FICO score, but not exact.

Although there is some debate on how accurate any site other than the FICO open access affiliated scores are, I have found them to be very very similar if not the same.

Credit Karma also has tons of resources and articles about credit and scoring and helpful things to read.

Getting Your Credit Reports

Off we go to https://www.annualcreditreport.com

This is a free, easy, do it in ten minutes way to get access to all three of your credit reports.

Your credit reports are the in-depth versions of your credit score. The person who was following you around and tracking your every financial move to determine your creditworthiness was taking detailed notes. Those notes make up your credit report, which is used to spit out one number, known as your credit score. The difference is small, but significant.

When you get them, look over them carefully for errors. The most common errors are:

  • Wrong name. Robert vs. Bob. That simple name change could cause the credit bureaus to pull information to your report from the wrong person. It is ok if there are your nicknames in most cases, as long as the information is your information.
  • Wrong address.
  • Former spouse’s debt is showing on your report.
  • A loan or line of credit isn’t being shown. The bank or creditor hasn’t reported your loan or line of credit to the bureau. That could make your debt to credit ratio look skewed or lower your mix of kinds of debt you have out.
  • Payments to a loan have been applied to the wrong account. Your car loan shows it’s not being paid on because it’s being applied to your second car’s loan.
  • Duplicate loans. If the same loan is being shown twice that would make it appear as if your debt was doubled.
  • Older, bad debt is still showing after 7 years.

Any errors such as these that you see on your report can be disputed and potentially fixed.

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Creating a Monthly Budget

Now that we have got all the other stuff checked off our to-do list we can tackle the big one… the BUDGET!!!!

We have found our net worth which shows us where all our bills and rent and necessity money goes. We have been tracking our daily spending like champions for a month which shows us where what I like to call our Fun Bucks go. Goodness gracious, we are entirely prepared to make this budget happen!

We combine the knowledge of both of these steps and make the most important financial document known to mankind.

Fill in the columns with all your expenses from your net worth sheets and your daily spending logs.

Make sure that everything from your net worth sheet is broken down into monthly payments so that you aren’t over budgeting.

You may have a category such as insurance where you pay every three months for example. Break the quarterly payment down into monthly payments and save that amount every month. This way when it is time to pay the larger quarterly payment, the money is already there and it can be paid on time.  If you pay car insurance one a year, divide your total yearly premium by 12 and that is your budget every month for car insurance.

Now that we can see where our money is at, we need to decide what category we are going to tackle first. Here are our options:

  • Fixed expenses. These are things that you pay every month and never change amounts. Rent, mortgage, car payments, loan payments live here. The things that are paid yearly such as insurance, property taxes and such are included here. These will be most of the things in the net worth table.
  • Variable expenses. These are things that you pay every month and the amount does change. Groceries, gas for your car, toiletries you buy at the store, these things all change prices.
  • Fun bucks. Eating out, going to the movies, shopping excursions, those coffees and cocktails from above live here too. Extras! These will be most of the things in your daily spending log.

Put everything from our net worth table and our daily spending logs into one of the above categories and add them up.

Was there any spending that surprised you when all added up and in your face?

Daily coffees, cigarettes, cocktails etc?

If there was then great! We have a starting point.

Any chance your fun bucks category was a little too much? Maybe you are already pared down to the nitty-gritty and we need to focus on variable expenses? Could even be that your housing situation is too expensive and you need to really think about moving? Knowing all that we know now is going to help us make informed decisions about how to start moving forward and building our better lives.

Alright, people, this is where the journey really begins. We have calculated all our money numbers, got our reports sorted and know our credit scores and where every penny of our money goes. I’m so proud of you all for sticking with it and making it this far! My heart is melting!!

Alas, now we have to actually stick to the budget and put all the things we were talking about into practice to take control of your finances.

I am dying to see you guys’ plans and hear how you are budgeting.  Please please share them! We can help other people who are doing this by sharing all our good and bad experiences.

Ok loves, enough talking. Let’s go make cool stuff happen.

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