This is going to be extremely straight-forward.
I’m going to give you each step to get your finances in order.
At the end of one hour, you’re going to have a complete overview of your financial situation and be setting goals.
I’m going to recommend some tools to use throughout the process, but don’t worry, they’re all 100% free.
Set aside one hour and get started.
Step 1: Get Everything in One Place
You need to get an overview of your finances.
- Get out a piece of paper and a pen.
- Write down all of your debt. Separate each one with the individual amount beside it.
- Write down all of your banking and investment accounts with the value/amount of each.
- Open a free account with Personal Capital.
- Connect all of your credit card accounts and loans.
- Connect all of your banking and investment accounts.
Step 2: Check Your Credit
- Sign up for a free account with Credit Sesame.
- Go to AnnualCreditReport.com and pull one free report from a credit bureau of your choice.
- Once you get your report, you will look for discrepancies. You’re done with it for now.
Step 3: Plan Your Budget
- Write down your entire net (after taxes) income. Include all sources.
- Write down every category you spend money in (e.g.: groceries, clothing, etc.).
- Write down a guess of how much you can limit each category to each month.
- Spend the next 30 days tracking each purchase to get an accurate idea of the amounts.
- Sign up for a free account with Goodbudget.
- Put your entire net (after taxes) income into the website/app. Include all sources.
- Make a new “envelope” for each category you will need (e.g.: groceries, clothing, etc.).
- Set each envelope to a guesstimated amount, based on what you think you spend.
- Use the program to track each purchase for the next 30 days to get an accurate budget.
For more on budgeting, check out our Complete Guide to Budgeting.
Step 4: Create a Debt Payment Plan
You don’t need to hire a professional debt relief company. If you’re in so much debt that you don’t even know where to start and you’re facing legal trouble, consult a lawyer, but a debt relief company can’t do anything for you that you can’t do for yourself.
- Figure out the total amount of debt you owe. This should be easy since you copied it all down above.
- If you have some debt with high interest rates, consider a balance transfer to save on interest.
- Utilize the debt snowball or the debt avalanche to start paying down your debt fast.
Step 5: Calculate Your Emergency Fund
- Create a plan to save $1,000 as soon as possible. A temporary side job may be in order.
- Figure out how much money you would need to cover living expenses for six months.
- Think about the fact that you would go to a bare bones budget if an emergency struck.
- Include an amount in your budget to save each month, until your emergency fund is fully funded.
Step 6: Reevaluate Your Insurance
- Make sure you aren’t paying for anything you don’t need (e.g.: rental car insurance).
- Look at your car insurance and see if you can raise your deductible to lower your rate.
- Shop around to see if there is a better or cheaper company. USAA is my choice, hands down.
- Make sure you have enough coverage, but not way more than you need.
- Make sure you’re covered from every likely event (e.g.: fire, flood, earthquake, etc.).
- See if you can find a better or cheaper company. Again, USAA is my choice for all insurance.
- Do you have health insurance? If not, will you pay a penalty this year for not having it? Look into it.
- Shop around to find the best available plan. Plans change all the time – something may be cheaper now.
- If you don’t have life insurance, determine if you need it. Does anyone depend on your income?
- If you do have life insurance, re-read your policy to make sure all the possible deaths are covered.
- Make sure you have enough coverage to support what you need to support if something happens.
- Look into your options. Term may work better for you, but whole life works better in some cases.
- If you or your spouse is disabled, consider long-term disability insurance.
- Depending on the total value of assets you own, you may want to consider an umbrella policy.
- If you own your own business, make sure you have appropriate coverage and reexamine your policies.
- If you’re in a tight spot financially, and working a dangerous job, consider short-term disability insurance.
Step 7: Plan for Retirement
- If you’re employer does a 401(k) (or equatable fund) match, contribute at least enough to get the match.
- For your other retirement investing, decide whether your company’s plan or your own plan will be better.
- Once you make a decision, set a goal to start contributing (once your consumer debt is paid off).
- If you decide to invest for retirement on your own, educate yourself thoroughly on investing.
Live within your means and come back to this plan once a year. If you do, you’ll be ahead of the majority.
If your finances aren’t in order, will you get them in order today? If they are in order, what steps did you take to get them there?