Mastering your money: 12 steps to financial freedom

Photo illustration about the choices that lean to financial freedom as shown by a woman walking in the woods

We discuss many aspects of personal finance at Get Rich Slowly. We explore ways to earn more money, get out of debt, and build an emergency fund. We talk about the psychology of money management, and we share tips and tricks for making the most of your savings and your career. Basically, we do our best to help readers take control of their financial lives.

Sometimes it's easy to get lost in the little details of money management. Sometimes we forget the Big Picture. If you've resolved to take control of your finances, this article is the place to start. It's packed with tips and resources for making the most of your money.

Here then are twelve simple but effective steps to take control of your finances.

Step #1: Set Financial Goals

The road to wealth is paved with goals. If you don't know why you're doing this — why you're making sacrifices, why you're working so hard — it's too easy to fail. But if you set goals, they can help guide you even when things get tough. When you have to make decision, your goals can help you stay focused on what's important.

For your goals to be effective, they have to be personal. They have to mean something to you. Right now, one of my goals is to save money for travel. A couple of years ago, my goal was to save for a Mini Cooper. Before that, my goal was to get rid of 20 years of debt.

To keep your focus front and center, you might use web-based tools like Joe's Goals, StickK, or 43 Things. You might find an accountability partner. Or you might advertise to yourself. And be prepared for setbacks. You're not going to meet your goals without mistakes. Stuff happens. The best way to deal with problems is to have a plan before they occur.

Step #2: Track Every Penny You Spend

The authors of Your Money or Your Life urge readers to “keep track of every cent that comes into or goes out of your life.”

[This is] the best way to become conscious of how money actually comes and goes in your life as opposed to how you think it comes and goes…This is the step that somehow makes the biggest impact.

Last year, I stopped tracking my spending. I was spending less than I earned, and I figured it was too much work. I regretted that. In fact, I've vowed to resume tracking my spending again. I'm glad I did. I was able to see some trouble spots (comic books!) and make corrections.

It doesn't matter how you track your spending — the most important thing is to do it.

Whichever method you choose, stick with it. Make it a habit. Don't fudge the numbers. Record your transactions as soon as possible. Most of all, don't judge yourself. Tracking your spending is an exercise in data collection; it's not the appropriate time to change your habits.

Step #3: Develop a Budget

After you've tracked your spending for a few weeks (or months), use the data you've collected to develop a budget. According to The Millionaire Next Door, budgeting is one thing that sets the wealthy apart from the rest of us — 55% of millionaires keep a budget.

Many people — myself included — fail to budget for a variety of reasons: it's boring, we don't think we need it, or we don't know how. But this simple act can provide a roadmap for your money.

There are a variety of budgeting methods you can choose, from Andrew Tobias' three-step budget to the 60% budget. My recent favorite (and a favorite of GRS readers) is Elizabeth Warren's balanced money formula: 50% to Needs, 20% to Savings, and everything else to Wants. Simple but effective.

Crave more budgeting tips? Check out this article highlighting 13 tools for building a better budget. Hate the idea of budgeting? Consider the spending plan, a budgeting method for non-budgeters.

Tip! Spend less than you earn. This is the fundamental money skill. It's common sense, yet many people never learn to do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending and develop a budget, but those steps aren't completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers.

Step #4: Review Your Bills (and Ask for Discounts)

At least once each year, you should review the contracts and agreements you have with various banks and service providers. This is also a great time to review your financial accounts to be sure everything still matches your needs.

  • Read your credit-card agreements and make sure you understand everything. (If you don't, then ask questions.) When I read my own agreements, I dial the customer service line and ask for clarification.
  • Check your service levels. We have a tendency to keep paying for the same service we've always had, whether it's with our phone, our electricity, or our gym membership. Now's a good time to make a quick check to be sure you're only paying for what you need.
  • Ask for lower rates. All the way back in 2009, G.E. Miller shared how he cut his cable bill by 33% without losing any service. Many GRS readers reported similar success. Look through your monthly bills to see if there are any you could call to ask for a reduction on. If you are paying for channels you never use, think about switching to a streaming service you will actually use.
  • If you rent, review your lease or rental agreement to be sure you're clear on all of the policies. While you're at it, consider asking for a rent reduction. Sound crazy? If you're a good tenant and regularly pay on time, it's not so far-fetched.
  • Review your insurance. Are you carrying policies with three different companies? Consolidate them at one place. Check the deductibles on your auto and homeowners insurance. Are they too low? Could you afford to raise them and “self-insure” the first $1,000 of damage? And is your liability coverage high enough?
  • Go over your investment accounts. Check your balances and asset allocation. Are you too heavy in stocks for your risk tolerance? Should you own more stocks? If so, shift things around to get to your target allocation.

This step may be boring, but it's important. Terms change all the time. Your financial situation changes. Spending one afternoon a year to review your agreements (and ask for discounts) can keep you from getting trapped in contracts you don't want and save you money in the process.

Remember: You always have the right to ask for a discount, but it's not your right to receive one. It never hurts to ask, but if the answer is “no”, don't be a jerk. Thank the person who helped you and move on.

Step #5: Optimize Your Accounts

For seventeen years, I was an account holder at a large national bank. I paid an $8 “service charge” every month, as well as many other fees. I received terrible service and earned no interest. Over the last couple of years, I've finally begun to optimize my accounts. If you haven't already done so, consider the following:

  • Open an online high-yield savings account. Interest rates are about as low as they can go, and should increase in the months and years ahead.
  • Choose a rewards checking account. Believe it or not, it's possible to find checking accounts that pay interest. The best online checking accounts are paying about 1% right now, depending on your balance. But you can usually find an even better deal through your local bank or credit union. Check out this list of rewards checking accounts for rates of up to 5%.
  • Use a rewards credit card. If you have trouble with credit, it's best to avoid plastic altogether. If you can use credit responsibly, be sure to choose a credit card that pays you. Avoid cards that carry an annual fee. Find a rewards program that matches your lifestyle. But don't choose a card just because it offers a signup bonus or because it gives you a discount at your favorite store. Remember: your goal is to find a useful tool. Look for a long-term relationship you can live with.

It's important to choose accounts and systems that work for you. I signed up for a rewards checking account at a local credit union, but the nearest branch is fifteen minutes out of my way. I never used it, so the credit union closed the account. I compromised by opening on online checking account instead. I earn a lower rate, but it's an account I'll actually use.

Tip! When optimizing your banks and credit cards, consider using multiple accounts at each institution. For example, I have ING Direct subaccounts that allow me to target my savings. I save for vacation in one account, for a car in another, and I use a third account for emergency savings.

Step #6: Start an Emergency Fund

For years I lived paycheck-to-paycheck. I spent everything I earned. This worked well until something went wrong. Suddenly I'd find myself without money to pay for a car repair, or facing an expensive doctor's bill. I financed emergencies with credit cards. Eventually I saw the light and built up a rainy-day fund.

After you've optimized your accounts, make it a priority to save for emergencies. In The Total Money Makeover, Dave Ramsey explains why he believes an emergency fund should come before anything else:

Since I hate debt so much, people often ask why we don't start with the debt. I used to do that when I first started teaching and counseling, but I discovered that people would stop their whole Total Money Makeover because of an emergency — they felt guilty that they had to stop debt-reducing to survive.

Open an online high-yield savings account and add $20 or $50 to your account ever time you get paid.

Two years ago, I opened an account at ING Direct, where it's simple to schedule automatic deposits. After you've saved $1000, then you can attack your debt.

Related >> Learning to love the emergency fund.

Step #7: Get Out of Debt

Are you struggling under a heavy debt load from credit cards or student loans? Make it a priority to unload some of this burden in 2012. At the end of 2007, I said good-bye to 20 years of debt — it feels fantastic to have that weight off my shoulders.

If you have the mental discipline, you'll save money by paying down your high-interest debt first. But if you've tried that method before and failed, consider using a debt snowball. Pay your debts starting with the smallest balance first. Here's how:

  1. Order your debts from lowest balance to highest balance.
  2. Designate a certain amount of money to pay toward debts each month.
  3. Pay the minimum payment on all debts except the one with the lowest balance.
  4. Throw every other penny at the debt with the lowest balance.
  5. When that debt is gone, do not alter the monthly amount used to pay debts, but throw all you can at the debt with the next-lowest balance.

The debt snowball can give you awesome psychological payoffs, keeping you motivated to stay in the game. It's not mathematically ideal, but it worked for me (and for many others besides). However you choose to get out of debt, stick with it. Don't give up.


Tip! The perfect is the enemy of the good. When you spend so much time looking for the “best” choice that you never actually do anything, you're sabotaging yourself. And an ideal solution that you don't follow through with is worse than a good solution that you'll actually use. Choose a good option and act.

Step #8: Fund Your Retirement

If you're young, you probably don't think you need to start a retirement account. You're wrong. No matter how old you are, now is the time to begin saving for retirement. The extraordinary power of compound interest favors the young — and in a big way! In The Automatic Millionaire, David Bach writes:

The single biggest investment mistake you can make [is] not using your [retirement] plan and not maxing it out.

If your employer offers any sort of retirement-contribution matching, such as a 401(k), be sure to take advantage of it. It may not be “free” money, but it's darn close. Also consider starting a Roth IRA.

After reading The Automatic Millionaire a couple years ago, I opened a Roth IRA at Sharebuilder. It was easier than opening a checking account. I've managed to make the maximum contribution since 2006. In 2008 and 2009, I maxed out my 401(k).

Step #9: Automate Your Finances

Over the past few years, I've been moving toward a system of paperless personal finance. Along the way, I'm learning the value of automating routine transactions. When you make things automatic, you remove the human element, making it more difficult for you to mess things up.

The classic example is overdraft protection. By tying your checking account to your savings account, you have a safety net if you bounce a check. But there are other ways this can work for you. For example, I've set up automatic payments with the gas company, the cable company, and my auto insurance company. I also make automatic deposits to my online savings account.

One terrific advantage to automation: when you pay your bills and do your saving and investing automatically, it's easy to tell how much you have left over to spend at the end of each month!


Tip! Do what works for you. There are few hard-and-fast rules in the world of personal finance. I can suggest methods that have worked for me (and for others), but only you can determine if these methods are appropriate for your own circumstances.

Step #10: Earn Extra Money

You can meet a lot of your financial goals by reducing your spending and using the right tools. But nothing supercharges your progress like a boost in income. How can you earn extra money?

  • Ask for a raise. Several readers have written to tell me how they've given themselves a raise through ambition and ingenuity. How to negotiate your salary, either before or after you're hired.
  • Switch employers. Not every employer is able or willing to offer raises, even when they're merited. If you're in a position where a raise isn't possible, consider finding a new employer.
  • Take a second job. Many people find that the best way to get out of a financial hole is to temporarily take a second job. Nobody wants to work more than 40 hours per week, but sometimes that's what's needed to get out of debt or to save for a house. Just remind yourself that you're doing this for a short time.
  • Use your hobbies. Yes, it's possible to have money-making hobbies. You're not going to get rich playing World of Warcraft, but many people use productive hobbies to earn a little extra income.
  • Sell things. When I decided to get out of debt, one of my first steps was to sell a bunch of the stuff I'd bought with that $35,000. I used eBay, Craigslist, garage sales, and the Amazon Marketplace to sell the things I no longer needed or wanted. The money I earned jump-started my debt reduction.

Another effective way to increase your income is to pursue entrepreneurship. While working to defeat my debt, I started a small computer consulting business. It didn't generate a lot of income, but it did provide $2,000 a year that I wouldn't have had otherwise!

Step #11: Learn the Art of Conscious Spending

Being frugal doesn't mean you have to deprive yourself. You're not giving up the good stuff for the rest of your life. Instead, frugality is about choosing to spend it on the things that are important to you while cutting back ruthlessly on the things that aren't. Ramit Sethi calls this conscious spending, which is a fantastic way to describe it. Conscious spending implies that you're actively choosing to spend on some things and not on others.

Contrast this with how most people spend. We tend to spend on reflex. We buy things because we're expected to, because everyone else does. We spend to have what other people have. We sign up for gym memberships that we never use, subscribe to magazines we never read, and pay for golf clubs that get buried in the garage. We make impulse purchases at the grocery store — or even on large items, like computers and cars. Most of the time, people spend without thinking.

But with conscious spending, you evaluate every purchase. You ask yourself: “Will buying this help me meet my goals? Will it make me happier? Is it congruent with who I am and what I want to do?” I know this sounds like New Age mumbo-jumbo, but it's not. These questions can have a powerful positive effect on how you spend and save.

Conscious spending isn't restrictive; it's liberating. It lets you cut back on the things that aren't important to you so that you can spend on the things that do matter. Learning to practice conscious spending is a sure way to improve your quality of life.

Related >> Conscious spending in action.

Step #12: Educate Yourself

Knowledge is power. Personal finance doesn't have to be a mystery. Subscribe to this site. Read other personal finance sites. Visit your public library. Borrow money books and self-development manuals. Here are four of my favorites:

You don't have to agree with everything in a book to get something out of it. I read a lot of personal finance books — some are good, but many are not. Even the worst books usually have one or two things I can pull from them. Learn how to read a personal finance book so that you can pick and choose those pieces appropriate for your life.

Blatant self-promotion! I wrote my own book precisely to help people who are struggling with money. Your Money: The Missing Manual contains all of the advice I wish I'd had when I was digging out of debt and learning to boost my income. If you like what you read here at Get Rich Slowly, you should like this book. It has tons of new stuff (as well as a few favorite nuggets from the past).

Final Thoughts

Taking control of your finances can be intimidating — there's so much to do! — but it doesn't have to be that way. One effective solution is to take a vacation day from work: designate one specific date as your personal “Money Day”. Use this day to finally set up Quicken on your computer, to open a retirement account, and to call around for a better deal on your insurance.

The good news is that you can get out of debt. You can save for retirement. If I can do it, so can you.

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DC Portland
DC Portland
13 years ago

What a great way to start out the new year with your blog! Good advice. My experience has been that many people struggle with their financial goals and plans because they have so strongly tied their sense of self-worth (image) with a level of consumption that is beyond their means. I think a critical step toward success is to recognize this fact, and then actively seek ways of separating your image of yourself from a high level of consumption. If you do so, you will be surprised at how much easier good financial habits are to practice. If you cannot… Read more »

GG
GG
13 years ago

What’s the point of tracking every penny if you then go on to waste some of those pennies with the snowball debt reduction? I’m all for doing what works best for each person and tracking spending, but I think this blog undersells the benefits of paying off high interest debt first. The good feelings from making debts disappear is great and all, but I personally feel much better when I know I am making the best financial decisions for the long term.

Scott Simmons
Scott Simmons
13 years ago

J.D. has always made it clear, I think, that a plan that starts with the high interest rather than the high balance debt will save you money. The point it, that savings is assuming you stick to the plan, come hell or high water. Ignoring one’s own psychology is the pitfall of any life improvement; and you’ll save a lot more money with a debt snowball plan that you’re able to stick with until everything’s paid off than with a standard debt reduction plan that you quit in frustration after a few months. If you’re sure you can stick to… Read more »

J.D.
J.D.
13 years ago

Ah — that’s why you should choose to DO WHAT WORKS FOR YOU. There’s no doubt that you can save money by paying high-interest debt first. For some people, this is a good choice. But I contend that most people who struggle with debt aren’t going to be swayed by mathematical arguments. If they were, the wouldn’t be in debt in the first place. Most people who are in debt are dealing with psychological barriers, and the debt snowball method is a fantastic tool for them. Don’t sell it short. I tried for years to get out of debt by… Read more »

brad
brad
13 years ago

Budgeting is the thing that has never worked for me, and I’ve tried quite a few different approaches. I’m actually not convinced that it’s all that helpful except for people who are very disciplined and self-accountable (which rules out me). These days, the only things I set a budget for are items like contributions to charity (which I base on a percentage of my income), contributions to my retirement account, and expenses that I’ve learned from past experience will get out of hand unless I put a cap on them. In order for a budget to work, you need a… Read more »

The Saint
The Saint
13 years ago

I found this site a couple of weeks ago via Google add-ins for customizing your home page. I have read a lot of info and have found it to be good info as is this subject. I read the Wealthy Barber years ago and was floored with the simple concepts and much needed advise. I have read the RD/PD books and listen to Dave Ramsey from time to time but as with Dave and a lot of “money” sites they seem to be speaking to the same people but not me. Maybe I don’t need it or it’s more of… Read more »

MillionDollarJourney.com
MillionDollarJourney.com
13 years ago

Great post JD.

For those of you who don’t like the budget, you should give ms money a shot. Yes, i read some comments on how ms money can tedious, but once you get it setup, it runs smooth. A feature that I really like is that it can estimate your cashflows in the near future based on hypethetical spending.

It’s a great way to “tweak” your finances.

FT
http://www.milliondollarjourney.com

oneyearexitplan (paulgonzalez)
oneyearexitplan (paulgonzalez)
13 years ago

JD, right on! Excellent post. Interestingly, “Your Money or Your Life” actually does not recommend budgeting, but instead focuses on daily awareness of your “life energy” … which is not some frou-frou, hokey supernatural crap. It’s their way of explaining that money is what you trade your life/hours for (assuming you work for a living). Thus, a real effort in reducing your expenses (or getting rich, for that matter) starts with tracking every single penny that comes in an out of your life and evaluating if a) what was “spent” was worth it and b) if you’d want more/less of… Read more »

GG
GG
13 years ago

I agree that money is more about perceptions then the raw math. You shouldn’t sell yourselves short though. A lot of being successful is believing in yourself while also not letting yourself down. The snowball system is a great place to start building confidence in one’s ability to stick to a financial plan.

QH
QH
13 years ago

I have recently had a chance of using a Personal Finance Software package by Australian business Parcus Group – Personal Finance Associate.
The product is very good. For the AU$29 it costs, you get budgeting, financial planning templates as well as advanced features that typically cost loads more as separate software packages such as investment real estate calculations (mainly based on rental cash-flow analysis) as well as some value based shares valuations (based on Warren Buffet’s stock valuation methodology)
Their website is http://www.parcusgroup.com
For anyone interested in their own wealth creation this product is definitely worth looking at.

Debbie
Debbie
13 years ago

Brad, it sounds like you’re already doing all the budgeting you need except in the “unforseen budget blower” category. If you don’t have these every month, you can save for them in the months you don’t have them. Pick another percentage of your income (start small and work you way up if necessary) and then next time one of these things comes along (unless it’s this month), you can fight back. I think the most important category is what you refer to as “expenses that I’ve learned from past experience will get out of hand unless I put a cap… Read more »

Matt
Matt
13 years ago

Great post, the fact of the matter is that getting your finances in order is a fairly simple task when you really it down. Understandably for a lot of people it’s daunting because they’ve never done anything of the sort. I’m in the process of doing all of the steps you’ve mentioned above but the biggest one that really hit me was when I took a good hard look at what I was spending my money on and realized just how much I was spending on all sorts of various things that I didn’t need to. Smokes were costing me… Read more »

Mox
Mox
13 years ago

“After reading The Automatic Millionaire last Christmas, I opened a Roth IRA at Sharebuilder. [disclosure] It was easier than opening a checking account. I didn’t fully fund the account in 2006, but you can bet I will in 2007!”

I believe you have until April 2007 to contribute to your 2006 Roth IRA.

Victor
Victor
13 years ago

I strongly recommend an online application to track your finances in a easy way: http://mo.neytrack.in

Check out complete features here: http://mo.neytrack.in/features

And the best: it’s free!

Dusitn
Dusitn
13 years ago

Pay off the lowest balance loan first, huh?

At first glance I thought this could be a foolish idea. For example, if the interest on one loan was tax deducable it could be argued whether or not to pay that off first. Or what about higher interest loans (even the difference of 1 percent)?

Well if you never pay off any of your loans then you will never lower your need on debt, so just pay one off already!

Peter
Peter
13 years ago

I have been using a budget I heard about a while ago. The 10/20/70 system. You put 10% into retirement savings, 20% into unexpected/mid term things like car repairs, vacations, insurance or a new roof. You spend the remaining 70% on all your fixed and discretionary expenses. As long as you don’t spend more than the 70%, you will be covered for long term savings and emergencies.

ASLAN
ASLAN
13 years ago

Right now I am broke as hell ( I have like 10 bucks in my possesion) and if it wasn’t for my wife I’d be far worse. I really apreciate your “guidelines” because I’ve had a problem with managing money for a long time, yet never really saw it as a problem. Until now…that I’m broke (and have over 10k in debt). I really hope your tips can turn me around so I can post a sucess story commment!!

Again, thank you!

pfstock
pfstock
13 years ago

A correction: The Millionaire Next Door was written by Thomas Stanley and William Danko NOT David Bach as you noted. Bach is the author of the much inferior book, The Automatic Millionaire.

One interesting thing to note is that if 55% of millionaires keep a budget, that means that 45% don’t budget.

cdude
cdude
13 years ago

spend less then you earn! that’s great advice. I keep track of every last dollar I spend. I only buy absolute necessities: food, gas, and cell phone (needed for emergencies, job interviews, business, etc). For gas, I always take the shortest route and seek to minimize the driving, using gasbuddy.com. For food, I almost always use groceries. Typically before I buy any food item, I calculate the per day cost of that item, normalized for a 1800 calorie diet (i eat less, since it costs less and keeps me lighter). Here are the cheapest: Rice (22cents/day, sphagetti 65cents/day, etc, etc).… Read more »

John K
John K
13 years ago

Good article! The one thing to remember is, after you have paid off your debt, extend your emergency fund. One month’s of expenses should be available in a local savings account and another 2-3 months of expenses in a higher-yield savings program. That way, even if you become unemployed, you have enough to pay the bills until you get that first unemployment check and still have reserves to cover what that smaller check doesn’t cover. I am still a strong believer of “Pay yourself first”, which means savings comes out of the check first, not last. If you can’t make… Read more »

Lawrence
Lawrence
13 years ago

Order your debts from lowest balance to highest balance. Sorry, can’t agree here. This is analogous to doing all those little urgent, but relatively unimportant tasks first, then attacking the big tasks. The thing is the little tasks keep coming, so the big ones never get worked on. It may feel good to pay the little bills, but they lack the significance of the big ones. Need proof? Just look at the Interest portion of your credit card statement. What psychological boost is there in saying “Gee — I’m now current with the gas bill, but my credit card balance… Read more »

Roan Lavery
Roan Lavery
13 years ago

For UK freelancers wanting to take charge of their finances, there’s a new online application that integrates with your existing bank accounts and can track money in/out as well as calculate taxes.

http://www.freeagentcentral.co.uk

Jermayn Parker
Jermayn Parker
13 years ago

I enjoyed this read, I have struggled with debt, while not overall big, big enough to put pressure on me and fiance.

Thanks for some simple and effective ideas..

plonkee
plonkee
12 years ago

Automating my finances is the only reason that I don’t pay late fees, and is probably the best thing that I ever did for my finances. I do all my saving and investing this way, as well as as many of my bills as I can. A bonus is that all my utility suppliers offer discounts for direct debt (auto bill-pay).

lulugal11
lulugal11
12 years ago

I track every penny I spend and log it daily into Money software. It is a bit of a hassle sometimes but it sure does help to see exactly where my money is going.

Writer's Coin
Writer's Coin
12 years ago

A great primer for someone feeling overwhelmed! And props to you for including “Do what works for you,” since so many people get caught up doing exactly what works for someone else and then quitting when they can’t keep it up. It’s so important to find something you can stick with, regardless of how efficient or not it may be.

The thing is to take control of your finances.

The Saving Freak
The Saving Freak
12 years ago

A spending plan is the most useful tool we have in our financial planning. We spend all our money on paper every month. This allows us to make adjustments as the month goes on.

Money From The Sky
Money From The Sky
12 years ago

Thanks for the great tips. I know a lot of these tips you have listed in the past and has helped me start a financial plan for 2008. Let’s just hope I can stick with it and get on the path to debt freedom.

It will definitely be huge for me to continue reading this blog and keeping up with my blog to keep myself in check. Thanks again.

Eden
Eden
12 years ago

Hey J.D., I’m shocked to see that you aren’t on a budget. How do you know where your money is going? 🙂

Personally, I love my budget. It was like getting an instant raise and I’ve never felt so in control of my money. I hope PearBudget will work for you.

Michael
Michael
12 years ago

J.D., Thank you for your continued excellent personal finance observations. My wife and I read your blog daily and find it to be a treasure trove of knowledge and first hand experience. We have literally tried all the budget programs out there from Mint, Buddi, Grisbi, Moneydance, Quicken, and MS Money. We have found You Need a Budget ($39.99) http://www.youneedabudget.com , BudgetSimple ($19.99) http://www.budgetsimple.com/, and Money Manager EX (Free, Open Source) http://www.thezeal.com/software/index.php?Money_Manager_Ex to be among the best. We have been using YNAB Pro for six months now with great success. We have been using BudgetSimple now for almost a month… Read more »

Ruth
Ruth
12 years ago

I have to say that automating my payments has been the best form of disipline for me, my electric, cable, gas, cell phone, insurance ect….. all goes in to a separate savings account where I figured how much I needed out of each paycheck
to cover these expenses. I never really figured out what I saved in late fees but I am sure it is substantial. Really sloppy I know! But it gives me alot of peace of mind knowing all of these are paid. As far as budgeting I am still learning! Looking for any suggestions.

In Debt
In Debt
12 years ago

Excellent “to do” list. Young and I are working on several of those right now. Of course, the thing that would help us the most at the moment is income, but slowing the outflow is good too.

Dr Fierce
Dr Fierce
12 years ago

I would like to say I used to use quicken, but as a Mac user it leaves something to be desires. I have tried Mint and also the “My Portfolio” option through Bank of America. This past week, however, I switched to moneycenter.yodlee.com and think it is terrific. You can add just about any sort of account you want (banking, retirement, mortgage, credit card, even utilities, etc.) and it does a fairly sophisticated job of categorizing transactions automatically. It provides the right amount of granularity in budgeting, etc, and you can look at the data in multiple different ways.

Sam
Sam
12 years ago

I found that focusing on one goal (getting rid of all unsecured debt) helped us stay focused and energized. While we also tracked our spending in Quicken, maxed our our 401ks and added to our emergency fund our one and only goal was debt reduction. If the other goals (like creating a 0 based budget) didn’t happen (which it didn’t) or if I got behind on other goals (like keeping my Quicken data up to date or reaching our e/r fund goal) I wasn’t bummed out at all. My one and only goal in 2007 was paying down all unsecured… Read more »

Katrina Ramser
Katrina Ramser
12 years ago

I finally read The Total Money Makeover by Dave Ramsey over the weekend (took me two days; I couldn’t put it down). I’ve read Orman, Bach, and Warren, but Ramsey was some pretty good, in-your-face,I-know-your-tricks, stuff. Great entry!

RacerX
RacerX
12 years ago

I can’t recomend having the Emergency Fund first enough!

If you want to break the shackles of debt you have to stop using debt devices. Cut up the cards! If something really huge came up where you had to have the card, most companies can authorize a charge without it, or replace within 24 hours. It just stops the knee-jerk use.

Money From The Sky
Money From The Sky
12 years ago

@RacerX

Not really a fan of cutting up the cards. I took the approach of taking them out of the wallet, putting them in an envelop and then storing them in the closet. If there was a super need for them I can still go and dig for them, but other than that they are out of sight out of mind.

Tim
Tim
12 years ago

I’m a big fan of automating, budgeting and tracking. One reason is because it helps you visualize those long term goals. I’ve made it a goal of mine to increase my net worth $100k every year. I do this by planing out all my major expenses for the year, forecasting my investment returns, and determining how much to put away in retirement and emergency savings. Because I’ve been doing this for a couple of years, I can usually expect 40k to come from investments, 30k to come from house appreciation, 15k goes from my paycheck into my automatic deductions for… Read more »

Tim
Tim
12 years ago

Speaking of hiding credit cards for those of you that do…

A friend of mine who had problems with credit cards had a great way of combating those impulse buys. He would take his credit card and put it in a zip lock bag, fill the bag with water and put it in the freezer. When we wanted to make a purchase with the credit card he would have to take it out of the freezer and let it thaw – giving him a built in 12-24 hour cooling period before he went to make that purchase.

Amy
Amy
12 years ago

Excellent advice! I was pleased to see that we are doing almost everything on your list and attacking debt in the same way. We have about $1K left on our credit cards and we will finally be credit card free. My husband was unemployed for almost a year and, although we had a substantial savings, we ate through all of that with him being unemployed. Looking back I know that there were things we could have done differently, but my husband says at least we did that well. He thought we would probably would have had to file bankruptcy if… Read more »

Tim
Tim
12 years ago

Ok, I’m not the same Tim with the blog link in the name. This is a nice posting. I would only caveat that people shouldn’t correlate automating your finances with not actively managing your finances. Although you have set things on auto pilot, you still need to monitor what is going on just to ensure things like billpay actually goes through. I’m also a big fan of saving while you are paying off debt. Behavior is a key element of getting out of debt. You want to establish a good overall financial habit rather than just paying off debt. It… Read more »

Sigmenti
Sigmenti
12 years ago

Good list. For tracking expenses I’ve been using http://xpenser.com/ , SMSing as soon as I spend the money, sometimes Jotting it.

I’ve been tracking my save vs income percentage as the main number I try to beat each month. Gives me something easy to track and a monthly goal.

TotallyMiscellaneous
TotallyMiscellaneous
12 years ago

Great tips! I appreciate the value of consolidating a conglomerate of information, and putting into simple terms for those working on their personal finances.

I’m a Dave Ramsey fan, but I definitely benefit from the entries here at GRS!

Aleks
Aleks
12 years ago

Automating is convenient when it works, but can be a real pain when it doesn’t. I’m in the middle of dealing with an issue where one of my automatic withdrawals was switching over how they do the transaction, and as a result I was double-billed this month. Luckily this is my church, so it shouldn’t be particularly acrimonious, although it’s still a hassle. I’ve had issues in the past where my phone bill payment was not recorded and they then wanted to charge me late fees. If I was using automatic payment at that time they probably would’ve just billed… Read more »

SavingDiva
SavingDiva
12 years ago

Great post! I’m working toward being in charge of my finances, but I’m not totally there!

Alya
Alya
12 years ago

What works for me is my excel spreadsheet. I keep in online on google docs, so I can update it either when I am at lunch break or at home. I find it works well for me and it is simple to use (since I created it). I tried Quiken and Money before,but somehow it was making budgeting and saving overwhelming. I use credit card for all my purchases and thus easy to keep track of my expenses. I always have 50 dollars in my wallet that I never use unless noone accepts credit card ( which is hardly!). This… Read more »

db
db
12 years ago

I use my interpretation of Dave Ramsey’s Zero-based budget, and I actively manage most of my expenses through my credit union’s Bill Pay service. I don’t do anything fancy to track my budget — I just scribble it out on a small note pad and adjust as needed. I have a couple of things on Auto-Pay, only because it’s either that or dealing with a check. I much prefer using Bill Pay to Auto-Pay because I can log on and control the amount from month to month, and I can also choose the day that it’s initiated from my account.… Read more »

joseph
joseph
12 years ago

Those are some good times, here is one that I really liked after reading about it in Entrepreneur Magazine this month.

The best thing that they talk about is the useful services of a virtual concierge / assistant service called Red Butler. A co worker of mine just joined and raved about it so I joined as well.

They take excellent care of me, calls, appointments, wake up calls, flights, reservations, gifts and I pay 36 dollars a month. Great service and value, although I wish they also offered errand type services.

http://www.RedButler.com

Hannes
Hannes
12 years ago

I like to keep it simple. The 60% is for me.

I just take 10% of my money out from bank and use that for fun. 10% goes to retirement (probably too much because I’m only 23), 10% to long term (min 10 year), and 10% goes to shortterm savings.

Mark
Mark
12 years ago

Another nice free online money tracking application is http://zenbudget.com

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