Track every penny you spend
You know how all the weight loss gurus say if you want to lose weight, you need to write down every single morsel of food that passes by your lips? Well, the same goes for money. If you want to take control of your finances, you need to start by tracking every penny you spend. There are several different ways to track your spending. Go old school and write it in a notebook, or go hi-tech and use an online tool like Mint.com, TrackEveryCoin or CoinKeeper. Pick the method that works best for you, and then remember to record transactions right after they occur and to make recording a habit (and don’t fudge your numbers). Tracking your spending will help you see exactly where your money is going, observe trends, and make an informed budget based on your observations.
Automate your bill payments
Switch to online bill pay and authorize participating service providers like your electric company, cable company, and cell phone company to automatically withdraw an amount equal to your bill from your checking account on or close to the bill’s due date. Where possible, set up automatic payments though your bank for your mortgage payments or monthly rent, and set up automatic payments with each of your credit card companies for at least the minimum monthly balances. By automatizing your recurring bill payments, you’ll save time, the environment (no paper statements!) and money (no more late fees for forgetting to pay bills on time).
Make paying down your debt a priority
Do you have tons of student debt or credit card debt? If so, then you know perfectly well how suffocating the weight of that debt can feel. To make solid strides towards reducing your debt in 2013, pay your monthly minimums each month (more if you can manage) and then designate every other penny to your debt with the lowest balance. When that debt is paid off, designate every other penny to the debt with the second lowest-balance. Follow this pattern until all your debts are paid off.
Do your due diligence: Look into all your bills’ fees and charges
Go through all your bills (bank statements, credit cards, cell phones, Internet, home phone, etc.). Do any of the fees or charges surprise you or seem unduly high? If so, call up your service provider and discuss your dissatisfaction with the fees and high charges and attempt to negotiate to remove or lower the fee. You’d be surprised by how much you can lower your bills by just asking.
Hustle! Earn extra Income outside of your primary job
If your current income is not sufficient to support you and your family, pay off all your debt, and build a sizable savings, you need to look into ways to earn extra money every month. For example, start selling or consigning clothes, take on freelance writing gigs, sell your crafts on Etsy, babysit, tutor, bartend, rent out your spare bedroom, moonlight as a wedding singer, and so on. Whatever you can do to bring in the extra money, do it. Don’t use this extra money as discretionary income. Instead, put this money towards paying off your debt and building your savings and emergency fund.
Prepare for the worst by creating an emergency fund
Living paycheck to paycheck works fine until something happens: you lose your job, your car engine (and brakes and tires and radiator) need to be replaced, mutant termites eat through your entire house, and so on. There are a million and one theories out there about how big your emergency fund should be. Suze Orman says it should be 8 months of your living expenses. Dave Ramsay says 3 to 6 months of your living expenses. But first things first, never rely on your line of credit from your credit card as your emergency fund. A bank has the power to revoke your line of credit for any reason at any time (like exactly when a disaster strikes). Sure, you may use your credit card in emergencies, but it is by no means an emergency fund. No matter what your financial situation or debt profile, you should have an emergency fund of at least $1,000. For each dependent family member you support, tack on an additional one month of living expenses to this base line of $1,000.