We all stumble in life. It’s inevitable, especially in the financial arena. And just as that old idiom says, the important part of falling down is getting back up. But, especially when it comes to money, the path to getting back on your feet can be murky. Outside of making more money, how can you get your finances back on track?
The simplest and most effective method is by creating a budget that will set your finances back on track. The idea of a budget can be a scary and complicated prospect to some, but if you follow the steps in this guide you’ll be able to create one of your own in no time at all.
The first step to getting back on your feet is to assess your current financial situation. How much have you got in the bank? How much do you owe? How long do you have to pay it back? There’s a variety of apps that can help you with this, such as Mint, but you can always just do it the old fashioned way by taking a look at your bank account and tallying your current net worth.
After you know your net worth, the next step is to calculate your income vs expenses. Income is easy to find (just look at your paycheck), but expenses can be a little trickier. The way to hunt down your expenses is to look at the average of the money leaving your account each month, and then break that down into specific categories such as food or business.
Now that you know where you are, it’s time to plan for where you want to be. Budgeting is a lot like drawing up a road map for a trip, except instead of streets, you’re looking at cutting out expenses as shortcut. If you’re goal is to have 12k in the savings by the end of the year, then you need to cut down on your expenses until you have an extra $1,000 at the end of each month.
Budgeting is fundamentally about ordering and giving your finances a structure that benefits you. Without a budget to guide you, it’s far too easy to lose sight of your ultimate goal and instead flounder and even make your situation.
The final step to a successful comeback is to make sure that you don’t ever relapse. There’s a few key ways to achieve that: