Personal Finances - Six Steps to Take Now

by : Steve Gillman

You have probably read enough tips on personal finances, and maybe you are still in debt and without a plan for the future. Well, here is simple six-step plan to get you going in the right direction. Of course, like the other tips you have heard, it will only help if you actually use it.

1. Record Your Expenses

For a month or two, write down what you spend every penny on. This process may enlighten you as to where large chunks of your income goes, or show you how little things add up. You might even find that you are spending less by the end of the month, just because you are so aware of the money going out when you track it like this. After the month is over, categorize your expenses and see how much is going to various areas, like "eating out," "renting movies," "electric bills," etc.

2. Find Ways To Spend Less

Using the information you have gathered in step one, start finding every way you can to cut those expenditures. This can mean giving up a few things which are less important to you than your future financial security. On the other hand , it may just mean finding better ways to do things, without sacrificing anything. Turning the heat down while at work doesn't hurt, after all. Look for cheaper insurance, foods that cost less, better restaurants with lower prices, and on and on.

3. Apply The Money Saved To Debt

Now that you are spending less, you should have some money left over from those paychecks. Start applying it to any debts which you have. Always start with those that are at the highest interest rate, and use all "extra" money towards paying those off first. If you have done this right, you are living just as well, but spending less to live that way, and getting out of debt.

4. Find New Sources Of Income

While you are working on step three, start looking for new ways to make some extra income. This could mean an extra shift at work each week or two, or asking for a raise, or even looking for a better job. It also could mean starting a small business on the weekends. Look at the skills, connections, knowledge and things you have. Renting out an extra room in your house could provide an extra $4,000 per year, for example.

5. Start Paying Cash

Everything is cheaper when you pay cash. Not only is it easier to negotiate a better price initially when paying cash, but you also don't pay the interest charges. This means that though you may have to wait and save for some things (like the next car), you live cheaper, or get to buy even more things you want (your choice). If you do use a credit card, pay it off each month.

6. Invest Regularly For The Future

Once you are controlling those expenses, generating new income, and staying out of debt, you should have a fair amount more coming in than going out. Start investing this money for the future. If you are uncomfortable with conventional investments like mutual funds or stocks, at least find the highest-interest bank account you can, and save to start a business.

Most of these ideas are probably not new to you, but if you actually follow a simple plan like this with your person finances, you'll almost certainly be more financially secure and more relaxed in a short time.