How To Be The Financial Commander In Your Household


2 March,2012

Are you tired of not knowing where your hard earned money is disappearing too each month?

Does all of your money just seem to disappear by the end of the month? Are you left with bills that you need to scramble to find money to pay them? Are you in debt up to your eyeballs and not even sure how you go there?

If you answered yes to just one or all of these questions it is time for you to take charge and be the financial commander in your household.

It is certainly no easy task to take command of your finances, but the longer you wait the harder it will be. The sooner you say enough is enough and surrender, the sooner you can start to feel in control. Don’t make the mistake of letting your finances get any further out of hand. Instead, take a close look at the following fool proof steps that will help you regain control of your financial life.

1) Create A Budget:

Creating a budget is the most crucial step in taking command of your household finances. Without a budget you will find yourself trying to win an impossible battle. Creating a budget is really not rocket science. You just need to make sure that the money you are spending each month does not total more than the money you are bringing in.

Now, for those of you who have no idea where you are spending your money each month, start with the basics. What bills do you have that are always the same? Like your mortgage for example, along with car payments, student loan bills, cable, cell phone bills, etc. Total up all of those. Now you may need to take your best guess when it comes to some of your other expenses like how much you spend on food, transportation, eating out, etc. Make sure you don’t leave anything out. If you go out for lunch every day that is an expense so make sure you include it.

So, what does your total show you? If you are in sticker shock you are not alone, many people today live way outside their means. Now it is time to get your hands dirty and balance the budget.

2) Balance The Household Budget

Now, if I said this would be an easy task I would be lying and if anyone tells you balancing your finances is a walk in the park they are lying.  Personally, I hate budgeting.  Yes, I’m a financial planner that hates budgeting and proud of it!  Instead of traditional budgeting, I’m more interested in tactical budgeting.

For most people, balancing their home budget takes time, dedication and in some cases some very serious sacrifices, especially if you have a lot of debt.

An easy way to do this is to use a free online service like Mint.com.   You can upload all your banking information and quickly see where all your money is really going.

3) Slashing What You Spend

You will need to take a serious look at where you are spending your money and start slashing what you spend. For most of us, there are things we spend money on each month that are a total waste. For example, do you have a gym membership that you never use?

How about magazine or newspaper subscriptions that for the most part end up in the recycling bin? How about your morning cup of coffee that you stop to grab on your way to work each day? Is take out Tuesday the norm in your home, when making a meal would be a fraction of the cost? These expenses need to be the first to go.

What about insurance premiums?  Can you save money there?  I recently refinanced my term life insurance and realized a savings of $400 per year!   All it took was less than 3 minutes to figure that out.

Your next task is not a fun one. You now need to take a close look at where else you are spending money for non-essentials. Now in this day and age I know you think that cable TV and your cell phone are necessities, but let’s face it they are luxuries. So is your subscription to Netflix, the cost of your kids dance or karate class, the wine collection you use to keep your sanity and more. It you are really going to take command of your finances you may need to cut some or all of these out of your budget, at least temporarily.

4) Create An Emergency Fund

Let’s face it, life happens and having an emergency fund can give us peace of mind for any financial curve balls that might come our way. If you have debt to pay down, many financial experts will tell you to quickly save $1000.00 for petty cash emergencies. Then, once your debt is gone you should build up your emergency fund until you have enough saved to cover 3-6 months of your expenses. Keep in mind that your emergency fund is for “real” emergencies only.

5) Paying Down The Debt

Being financially free is an exhilarating feeling and one you can’t feel until you pay off your debt. If you have debt, the only way to feel in total control of your finances and to be financially free is to get rid of it. Financial debt can also cause personal stress, relationship challenges and more. Paying down your debt should be a top priority.

If you have debt in credit cards, personal loans, etc’ you will want to make sure you are getting as much money from your monthly budget as possible to pay down your debt. Come up with a debt pay down plan. One option is to start with your smallest debt and pay it off as quickly as possible. Once it is paid off then start working on the next smallest debt until all of your debts are paid off.

Paying down debt fast is not easy and it will take some diligence. You may also want to think long and hard about finding additional income until your debt is paid off. Can you get an additional part time job? How about having a yard sale and cleaning out everything in your home you no longer need or use? Craigslist is another great option if you have items you could sell for some cash.

6) Keeping It All In Perspective

As a final piece of advice, make sure you keep it all in perspective. Taking command of your finances is not easy and there will be days that you feel defeated, we all do. Just don’t let those days get the better of you. Make sure you are realistic about your goals and always budget in a small amount of fun money each month as a reward for staying on track.