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3 Steps to Getting Your Finances On Track – Guest Post

As I had a particularly rough visit home last weekend and did not have the energy when finally got the time to write, my fantastic friend J. Money agreed to help me out with this post. J. Money writes for Budgets are Sexy – A laid back finance blog of a guy just trying to spice things up a bit. He also finds budgets….well…sexy! If you like what you see, pop on over and say hello. Or better yet, subscribe to his (free) V.I.P. Newsletter.

Rockin’ out your finances is smart anytime, but with the economy these days a little extra attention can go a longer way. And luckily, smart doesn’t mean complicated! Many of us try to make things a lot harder and convoluted than we have to, but it’s the simplest moves that will keep our nest eggs happy (and ourselves sane).

I present to you 3 of my all-time favorite strategies. The more you can check off, the better your financial life will be. And you’ll see they’re pretty plain words of advice as well – just don’t mistake boring for not worth while! They may not look all that sexy, but they’ll sure keep you out of trouble.

1. Track your spending for 3 months

This is the one thing you can do to learn EXACTLY where your hard-earned money goes to. Think of it as an E-True Hollywood Story based on Your Financial Life – you think you know, but you have no idea! Haha..okay, well maybe it’s not that drastic, but you’d be amazed at the things you’d find if you actually sat down and sorted through it all. Even if you do it just one time, and one time only, it’ll give you a better over all picture of your finances.

Once you know exactly how much you spend, you can then figure out how to move forward – whether it’s to remain on the same route you’re currently taking, or move to a newer one. I had guestimated a budget of $500 for my credit card each month (I put most of my expenses on it for better budgeting & cash back rewards), but in reality i was spending between $800-$1200! Whoops. I then created a more realistic budget. (if you need help finding one that works, try some of these budget templates I’ve collected from around the web.)

2. Create an Emergency Fund

The emergency fund is important, if only for great peace of mind. There’s something to be said in having a pile of cash in your account for whatever it is you’ll need it for. I really don’t know what constitutes an emergency, exactly, but for me it’s more of a stash to keep myself out of trouble πŸ˜‰ As for how much to put in there, I personally shoot for 3 months, but it really depends on what you’re comfortable with. It can be 2, 3, even 6 months, whatever you feel would make you sleep better at night. Once you reach that point, you’re all set! You can then go about using your money as you wish, knowing you have that safety net.

3. Pay off all Bad Debt

Get rid of it! Whether it’s credit cards, outstanding loans to friends or family, or whatever – it’s not great to have. This is much easier said than done, of course, but my goodness if it’s not true. It effects everything from credit scores, mortgage rates, car loans, and even worst – your overall happiness πŸ™ What would you do if you had $0.00 in debt?! How insanely awesome would you feel! It’s not gonna happen overnight, and it certainly won’t be easy, but it needs to happen. Whatever you need to get rid of it, do it.

Again, these aren’t the hottest or newest ideas around town, but they work. And they work WELL. It’s all about getting your mind right and staying focused. If you can do that, you’ll be a lot better off once this crap storm comes to an end. Shoot, you do just ONE of the three items and you’ll be much happier! All you have to do is start.


{ 7 comments… read them below or add one }

thriftygal@chasingprosperity January 11, 2010 at 11:58 am

We just started budgeting and tracking expenses at the begining of this year, and you’re right – it just gives you much more control over how you spend your money. I’ve only spent once weekend on it so far and I’m already addicted!
.-= thriftygal@chasingprosperity´s last blog ..7 Ways We Throw Money Away by Not Paying Attention =-.

Craig January 11, 2010 at 12:07 pm

I like the idea of tracking your spending for 3 months. Once you have a good range of what your potential expenses could be, then you can work on the rest. Only thing is if you tend to spend more seasonly for whatever reasons.
.-= Craig´s last blog ..When it Snows, it Snows Money =-.

ChristianPF January 11, 2010 at 12:26 pm

J, good article, I couldn’t agree more about the emergency fund. Having an emergency fund was one of the best moves I ever made for my finances – the peace that comes from having a little cash on the side is invaluable…
.-= ChristianPF´s last blog ..How (and where) to donate your car to charity =-.

Dustin | Engaged Marriage January 11, 2010 at 1:25 pm

Nice article, J! I can speak from experience that paying off debt provides a LOT of freedom. $58,5000 later, we are kickin’ it!

Joseph January 11, 2010 at 5:14 pm

Emergency fund is like the heart of anyone trying to get out of debt. We set up an emmergency fund and we have used it twice on major car fixes. Glad we did because that would have been a nightmare.
Joseph
.-= Joseph´s last blog ..Living in apartment homes? How to save =-.

J. Money January 11, 2010 at 7:49 pm

Thx for the eyeballs my dear!

@thriftygal@chasingprosperity – Great! And you know what the best part of it is? It’ll get MUCH easier to stay on top of and track going forward – you’ve already don the hard part πŸ˜‰ Congrats!

@Craig – For sure. After doing it for 2 years myself, I know more or less what’ll be going out and coming in every month, making it much easier to make quicker decisions and more responsibly. And then, since I have that track record w/ myself, I don’t have to monitor my budget 24/7 – I can reference it a cple times a month and be golden. The seasonal stuff can get tricky, but as long as you’re bringing in more than you spend, and you have a nice emergency fund on hand, you’ll be just fine.

@ChristianPF – You know it, my man! Peace of mind = closer to financial freedom πŸ˜‰ As soon as we don’t have to worry about mortgages and all our bills (or working for that matter) we’ll be even happier! haha…

@Dustin | Engaged Marriage – That’s what I like to hear! Great work over there, very impressive.

@Joseph – I’m stealing your quote and tweeting it πŸ˜‰ “Emergency fund is like the heart of anyone trying to get out of debt.” You nailed it bro.
.-= J. Money´s last blog ..Personal Financial Statements shouldn’t be Top Secret. =-.

Pareto FP May 3, 2012 at 10:39 am

So many people underestimate the effect “spend tracking” has on saving money, in my opinion it’s the backbone to any budgeting plan. There aren’t really any excuses, especially when there even very effective mobile phone applications that assist with this, if people have time to check facebook on their phone, they can log their spend.

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