Who's Minding Your Money?

Three ways to take control of your finances

Are you where you want to be financially? Do you feel like things could be a little better financially but you just haven’t figured out how to change things. To have financial freedom you have to take control of your finances.  Often times after I do a speech or teach a seminar I will have someone from the audience come up to me and ask “do you do one-on-one sessions” I have toyed with the idea but never really moved on the idea of helping individual families with their finances.

The main reason that I don’t help individuals is most people aren’t really interested in changing, they are just in love with the idea of having a better financial situation. The concept to getting where you want to be financially is to change what you are currently doing and do something different. Most experts say that personal finance is 20% knowledge and 80% personal. That means to really change your financial situation you have to change you and your habits.

The first major step to getting  your financial house in order is to get control of your finances, this month I want to give you three things that you can do to get your finances on the road to recovery and where you want to be.

1.      Organize your finances

The official definition of financial management is; the process of prioritizing the allocation of cash to support your goals. The real definition of financial management is being able to tell your money where to go and actually making it go there. Organized finances will help you to make better decisions about your money. By taking the time to develop, a system which allows you to grasp where you are financially you can get a clear picture of where you really are compared to where you want to be financially.

Part of organizing your finances means that you and your spouse are on the same page with regards to where your family is going financially. The next step in getting organized is to take the time to write down all the important financial information and keeping it in one central location. Have you ever applied for a loan and couldn’t find all the necessary paper work. Take some time to write down information about your finances like bank account numbers, passwords and other important information. Also, create a list of your current debts and the contact information of the companies whom you owe the debt to. Gather other documents such as birth certificates, insurance policies and marriage certificates and keep them in a fireproof box for easy and quick access. This also makes it easy to have everything with you should you have to evacuate your home quickly.

2.      Automate your finances

Have you ever woken up in the middle of the night and wonder if you paid a bill? If you are like the average American family, you have several monthly financial obligations that need to be paid.  These days, most companies will tack on an additional charge if your payment is not paid on time. Consistently paying your bills late could end up costing you hundreds of dollars each year. The next thing that you should do to gain control of your financial situation is to automate your payments and have then taken directly out of your bank account. I will admit it is easy for me to automate my finances because I love technology.  

Most banks have free online bill pay combined with your checking account. By setting up your frequent payments in the online bill payment system, you will reduce the chance of forgetting to pay a bill, and you get a sense of control at the same time. The question or complaint that I get most often about auto-bill pay is “what if the money isn’t available with the bill is due.” I will be the first to admit that if you aren’t in control of your finances this will be challenging at first. The way I use our auto bill pay is I have all our bills set-up in bill pay and I would go in a couple days before payday and determine which bill needs to be paid and have only those amounts taken out of our account on payday.

3.       Track your spending

I know you are saying, “I knew he would mention budgeting at some point” well I am sorry to disappoint you. Tracking your spending is not the same as budgeting. When you budget your money you create a spending plan, when you track your spending you usually do that after you have already spent the money, which makes it a spending record. Either way it is important that you track what you are spending so that you will start to understand which areas you need to curtail your spending.

There are several ways to track your spending; the least expensive way is to get a note pad and a pencil from your local office supply store. Then at the end of each day take a few moments and reflect back on the money you’ve spent that day. I have been doing this for so long I don’t need a note pad and pencil I just automatically keep a running mental tab. The other day my family met a couple friends for lunch at a local seafood restaurant, our portion of the bill was around $33 with tip. Shortly after that, we decided to go to the park and hang out since it was such a nice day. While at the park, we all decided to ride the train around the park, which cost another $18. My friend and I were walking to get the cars and he asked what we were about to do. My response was “Since we just spent $51 of our entertainment budget today, we are going home to prepare a meal for dinner and call it a day”

I know that may sound like a bit excessive, but let’s face it you have to start the process of being in tune with the amount of money you spend on a daily basis otherwise what’s the alternative. There are also other ways of keeping track of your spending, you could invest in some personal financial software like Quicken by Intuit (which is what I use) or you could also set up and account on one of the free software sites like www.mint.com to track your spending.

Either way knowing where you have spent your money is the first step to creating a budget, and getting control of your finances. So there I hope these few tips served as a reminder of what you should be doing to get control of your finances. I realize that I didn’t share any new information but it is good to be reminded of things we should be doing.

By doing these three simple things, you began the process of taking control of your finances. That way your bills and your financial situation no longer control you. You can gain control of your finances by making better financial decisions day after day until those decisions become your habits. Once these things become habits you will feel more and more in control and ultimately be on the path toward long-term financial success.

“Your position in life TODAY is the sum of the decisions you have made and the habits you have created to this point. If you want to change your life change your HABITS”

This article was written by Lonnie R. Mathews for the Who's Minding Your Money blog. Lonnie is an author and speaker in the area of personal finance. To learn more about Lonnie or to contact him visit www.lonniemathews.com