Clear out your calendar this weekend and tackle your finances as a team. The faster you do it, the better you'll feel.
1. Confess Your Sins
Now's the time to grab your partner and lay all your cards on the table. Pull out your bank and credit card statements, info on all your assets and debts -- basically everything related to your current and future cash flow. Also order your personal credit reports and compare notes. Learn all about your credit report here
2. Survey the Damage
Get down to the nitty-gritty: How much do you owe? How much do you make? What are your pension funds, stocks, life insurance, or real-estate holdings worth? What are your monthly expenses? What do you pay for health and disability insurance? After all is said and done, what's left at the end of the month? Put this info into a spreadsheet.
3. Make a Plan of Action
Now that you have all your money owed and earned in one easy-to-read document, it's time to build a budget. Start with your combined monthly take-home income and subtract these categories (use a month's worth of past receipts and bills to help you):
Your Nest: rent/mortgage/maintenance, phone, electricity, cable, cell phone
Transportation: car payments, gas, public transportation, taxis, parking, insurance
Necessities: food and groceries, loan payments, medical bills, health insurance, new clothes, pet care
Investments: 401(k), CDs, IRAs
Fun Stuff: eating out, travel, music, grooming, gifts, gym membership, charity, miscellaneous splurges
Savings: "pay" a savings account at least 10 percent of every paycheck for two things:
- Emergency Money: Your monthly budget (minus savings) multiplied by six months. With this "worst case scenario" money in the bank, you won’t have the added stress of going broke.
- Fun Money: Keep $500 (or more) on hand so those eventual "splurges" (like a vacation) won't put you into debt.
4. Do Monthly Checkups
Review your budget monthly. If you go over, cut something next month. If you saved, congratulations -- put the extra money into savings and treat yourself to something small, like a lotto ticket. Remember, you'll need a surplus in your account around the holidays, birthdays, and anniversaries.
Nestpert Beth Kobliner, financial expert and author of Get a Financial Life: Personal Finance in Your Twenties and Thirties
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