By Tonya Rapley
You’re ready to get your finances in order, but where do you start?
I pretty much get this question on a weekly basis and I completely understand.
A little while back during a Twitter chat I said, “looking at your credit report for the first time is like walking into a room to find all your bad financial decisions hanging out.” It can be overwhelming, especially if you are starting from zero.
There are many different plans of action one can take, which I think are relative to your situation. While retirement is extremely important, I think establishing good financial habits and a budget are more important.
Getting Your Finances in Order
Step 1: Become employed or establish a regular form of income. To accomplish your financial goals you will need… finances to take care of your necessities (rent, food, transportation, child care, etc.).
Step 2: Establish a budget. I highly recommend my friendtor (Friend +Mentor) Tiffany “The Budgetnista” Alliche’s book The One Week Budget (which you can purchase on Kindle for less than $1 here ).
For this step you should be very familiar with your credit report so you can identify debts owed and the amounts. This will be key in determining a “get out of debt plan.” Be patient and just know that getting out of debt often takes longer than it did to get into debt, but it is more than possible. If you need to pull your credit report try a site like Quizzle or my credit report tutorial.
Step 3: Put away extra money towards your emergency fund. When I say what you can afford to, that doesn’t mean putting only $25 a month aside because you have $100 saved for your fun fund.
Establishing an emergency fund is essential. After graduating from college I was laid off from two jobs. Job security is not what it was for our parents and grandparents. It is important that you are prepared for whatever may happen. The amount you save each month should be in relation to the amount of income you will need to pay off your debts. For example, I currently save $300 per month and hope to boost that to $500 by next year.
While you should be concerned with investing, unless your job has a matching program which would essentially mean free money, focus on getting your savings together and your debt down. One thing I’ve learned is that you will need your emergency fund before your retirement account.
Once you get a grip on the basics, then begin visiting your investment and retirement options.
Also remember, more people have issues with finances than those that don’t. I hear of more financial messes, than I do of successes. Find a finance buddy and hold each other accountable. It’s so much easier when you are working with someone else to accomplish your financial goals.