Here's how to get control of your money in one month
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Are you constantly worrying about paying off your student loans? Breaking out into a sweat whenever you receive your bank statement? Losing sleep over your looming mortgage payment?
Well, you're not alone.
Money is a major source of angst for most people. In the American Psychological Association's annual survey on stress, money was the top cause of stress for American adults, and more than a quarter of respondents said they worry about money most or all of the time.
While job stability, income, and cost of living play a role in your financial fears, most people know they can't shake the money tree whenever they want to make a big purchase. No matter your situation, the solution for ratcheting down your anxiety is simple: Face your financial fears.
By getting control of your finances, you'll not only be able to make better money decisions – both in the big picture and day-to-day – you'll likely spend less time fretting about money matters the rest of the time.
Here's a week-by-week plan for getting there.
Week 1: Set specific and measurable goals
As with any undertaking, you'll want to start your planning by identifying your biggest wants and worries. This list might include everything from taking a dream vacation or buying a house, to sleeping better at night knowing you have set aside money for emergencies.
“You need to put some context around your finances," says Mike McGrath, a certified financial planner at EP Wealth Advisors in Valencia, Calif. “It's one thing to say you want to save more money, and quite another to visualize why you're doing it. Recognize how your decisions get you closer to or farther away from your goal."
Take your first week to identify your top financial goals, both for the near-term and the long-term. If buying a house is on your bucket list, for example, identify how much you need to save, when you hope to get there, and what specifically can you do to improve your odds. This exercise may lead you to identify other goals, such as paying off credit card debt, to work on in the interim.
Week 2: Create or update your budget
The idea of budgeting might seem daunting, but in reality, it requires three steps: Understand where you spend your money, identify expenses you can trim or eliminate, and set some parameters for future spending.
How exactly you create a budget and stick to it is up to you, says McGrath. While many people have embraced smart phone apps and budgeting software, your budget can be as simple as going through a worksheet of expenses.
Once you've paid off your fixed expenses like your utilities bills, use an app or savings software to set aside a certain amount each week or month. From there, keep your discretionary expenses in check by paying cash, tracking your debit card spending, or using a single credit card you pay off monthly.
Week 3: Pay yourself first
Saving, like budgeting, doesn't have to be rocket science. First, create different savings buckets. For example, most people will have three or four buckets, varying from retirement funds, to emergency funds, to long-term goals.
Next, decide how much you should save in each bucket—and set up automatic withdrawals that allow you to “pay yourself" in weekly, biweekly or monthly intervals.
For most people, saving is a balancing act: You want to make sure you're setting aside enough for immediate wants and needs, but you also want to take full advantage of the power of compounding savings over time.
If you have a 401(k) or another retirement plan through your employer with a matching contribution, aim to contribute at least enough to get the full match, and then increase that savings over time. If you're self-employed, allocate enough to your long-term bucket to get on track for retirement.
Of course, having enough saved for emergencies is key to making sure your plans don't get derailed. If you don't have adequate emergency savings, prioritize saving six months of bare bones expenses.
Once you have your emergency fund set, you can focus your attention on that dream getaway to Tahiti.
Week 4: Do a credit and debt check
Your credit history and corresponding credit scores, not only impact your ability to take out loans, but they determine how much you pay in interest rates. Over time, the difference between good credit and bad credit can add up. Make sure you know all there is to know about your credit score.
Getting control of your finances means checking your credit reports annually—which you can do for free—to spot and correct any errors; flag potential identity theft; and understand more about what factors are helping or hurting your score.
Once you have a grip on your credit history, you'll want to turn your attention to debt. Look at how much you owe, for what purposes, and the interest rates you're paying. Then, come up with a plan for paying down or reducing any high-interest debt—and, in the process, free up more money to put toward bigger goals on your bucket list.
Sarah Max is a Chase News contributor. Her work has been featured in the New York Times, AARP, and more.