How to Not Suck at Personal Finance

You’ve been here before. You work so hard to payoff debt and save more money every month. And yet somehow, you lose track, unexpected expenses pop up and you just don’t know where all that money went. 

You are now convinced that you are bad with money.

We’ve all been here before. 

But there is a way to prevent the vicious cycle of living paycheck to paycheck or coming up short on cash every now and then. There is a way to slowly build up your money management skills and build new habits so that you can be more consistent. 

And even if you make the occasional mistake, you can still recover. You don’t actually suck at personal finance. 

Here are 9 things you can review every time you need a little money management help. 

Create a Mint account online

There are many different expense tracking and budgeting tools online. I personally use Mint and Personal Capital. Both are free to use. I can also login to my USAA banking account and use their tools to do most of the same things. Lastly, I know that YNAB users are pretty much die hard fans for life. 

The point being, there are many options available. 

But if you don’t already use any online expense tracking and budgeting tools, Mint is the perfect place to start. Just visit Mint, create a new account, link your existing banking and investing accounts and you’re good to go. 

The benefit of Mint over my personal online banking website is that I can also link my credit cards, debts and investment accounts. This helps monitor all my spending across accounts and track my net worth. I can even monitor my FICO credit score every month.  

It is easy to get started and relatively painless to establish your spending categories, correctly label all banking and credit card transactions, and then design your new budget. 

Track your spending for one month

Now that you have your new Mint account, or similar tool, it’s time to load all your income and expenses over the last month. If you are doing this on September 17, you will comb through every single penny you earned or spent since August 17. 

Within the online software or app, you will use the “Transactions” tab. This will show all transactions across all accounts that you have linked to your Mint account. Select the “All Transactions” to view everything. 

You will then see a list of your transactions, with an automatically assigned income or expense category. Check each category to make sure it is correct. If you see your last gas station transaction and it’s marked as groceries, click on the transaction and edit the category.

Using the online website, you can set recurring payments to automatically assign the correct category. However this feature isn’t available on the app. It can become a little tedious continually adjusting the category assignments manually. However, I find this to be a good thing because it forces me to check my account every few days. 

And checking my account every few days keeps me on top of my spending and budget. 

If you need more information on tracking your expenses, visit:

How To: Track Your Personal Finances

I Tracked My Finances For One Month and This is What I Learned.

Join the Stepping Stones to FI weekly newsletter and download your handy “I Don’t Suck at Personal Finance” checklist! Print it out and keep it where you can easily see it, refer back to it and track your progress over time. Plus, you gain instant access to the FREE resource library full of many additional personal finance workbooks and printables.

Track your spending from the last 3 months

Now that you have combed through every single banking transaction over the last month, do this again for the prior two months. This effectively provides you with your average spending over the last few months. 

You need this in order to create your new budget. 

Establish monthly spending limits

As you review your monthly expenses, you may notice some recurring habits. And you will likely uncover some areas of unnecessary spending. 

When I first ran through this exercise, I was a bit appalled by how much I was spending on transportation and personal care. 

Visit The True Cost of Your Daily Latte to read more about this!

With this step, you will want to review your Mint Budget online, rather than by using the app. Start by clicking on the Budget category. 

You will find a list of expense categories, which rely upon how you labeled your transactions over the last month. This is why it’s important to track your spending for a full 3 months before moving on to this step. While it uses the current month, you will need to have an idea of your typical transactions, how to label them, and finally, how much you typically spend each month. 

Use the budget tab to review your automatically populated budget for each month. Become familiar with how much you typically spend and review the transactions within each personal budget category. 

Think about how much you spent across each category over the last three months, and determine whether these transactions were necessary or not. Set a goal for yourself for the next month that challenges you to cut back on spending within most of your budget categories. 

Lastly, set your new spending limit for each category. 

This is your new budget!

For more help setting your budget and finding the right personal budget categories for you, visit:

The Beginner’s Guide to Creating a Budget You Can Stick To

150+ Expense Tracking Categories to Help You Track Your Finances and Budget

Track your budget for one month

Now that you have a new budget, complete with spending goals for each expense category, it’s time to follow that budget over the next month. 

You’ll want to use your Mint app regularly throughout the month to track your transactions, and correctly label them. These will then show up within your monthly budget, under the correct spending categories. You will see a nice visual bar graph of your spending as it relates to your monthly limit. 

As you approach your budget limit for a particular category, you will receive a notification from Mint. This is very helpful and reminds you to be conscious of your spending throughout the month. 

Revisit this post for later by adding it to your favorite Pinterest board!

Review your budget over the last 3 months

Once you have practiced tracking your expenses and have budgeting down, you’ll want to review and adjust your budget category limits often. 

You will likely find that the more aware you are of your spending limitations and goals, the more your mindset shifts. You will find it easier and easier to question purchase decisions and in turn, save more money. 

If you have trouble reviewing your budget frequently, try setting a reminder. Every morning or evening, open up your Mint app and review your transactions and check your budget. 

You can also use a habit building tool, like the HabitBull app. This app allows you to establish a new habit, like checking your Mint account every evening. You then need to check off that you completed this task every evening. The app will send you reminders if you forget or miss a few days. This is a great way to build positive habits, or break the bad habits. 

List all your debts

If you feel overwhelmed by debt and scared to even face how much you owe or how long it will take to pay it all, then this next task is for you.  

It’s time to take ownership of your debt and make a list of every account you have and how much you owe. Include the total owed as well as the interest rate you pay. 

That’s all you have to do for this step. 

If you already entered these things into Mint, and caught a glimpse of your net worth, you’re already mostly there. 

Whether you do this on scratch paper, in a spreadsheet, or within an app like Mint doesn’t matter. The important step here is just listing everything together so that you can start to take action. You’ll feel better once you do. 

Create your debt payoff plan

Now that you have your list of debts, along with interest rates, and you’re ready to move forward, it’s time to create your debt payoff plan. 

Be sure to visit How To: Payoff Debt Like a Boss for the nitty gritty details of creating your plan. I even have a FREE debt payoff workbook you can print out and use to step through this process. Even better, there is a debt payoff progress printable so that you can track your progress along the way. 

Since you started tracking your expenses and finding ways to cut back on your budget categories, you are probably saving more money every month. This money can be used towards your debt paydown. 

Snowball Method

Start out by listing all you debts in order of smallest amount owed to largest amount. This is the debt snowball method. Every month you will pay the minimum balance on all debts. The extra money you have left over from all your new savings will then be applied to paying off your smallest debt first. 

This provides a quick win when you start knocking down that first debt. Once one debt is paid off, you will apply the extra money, plus the minimum payments you were making on the first debt, to the second debt in line. As you go along, you will be able to apply more and more money to you larger debts, similar to a snowball gaining momentum down a hill. 

Avalanche Method

For this method you will list all you debts in order of largest interest rate to smallest. While you won’t make initial momentum like you would with the snowball method, you will save money in the long run by paying off the largest interest rate debts first. 

If you highest interest rate debt also happens to be your largest debt, it can feel a little defeating to keep adding extra payments and not seeing swift results. However, stay the course and remember that while it doesn’t feel like progress, you are paying off that debt and you are saving yourself money by lowering your interest payments. 

Avalanche + Snowball methods

Personal finance is personal. You get to decide which method works best for you. You can even find a combination of the two methods that works best. 

Regardless of whether you choose the snowball or avalanche method, or a combination of the two, the important thing is that you create your plan. 

Map out how you will attack your debt paydown then project how long it will take you to payoff all your debts. This is the date that you can claim the title of being debt free! Mark it down on the calendar, fill out your debt progress worksheet and display it on the refrigerator. Track your progress and you will stay motivated to maintain consistency. You may even beat your goal date!

Automate recurring monthly payments and savings

Last on the checklist is automate your personal finance as much as possible. While you still need to be tracking your spending and monitoring your budget, you don’t need to be shuffling money around all the time. 

The first place to start is to set up auto bill pay through your bank. Most banks allow this feature and make it quite easy to either automatically send the same payment every month, or, connect with your service provider and mail a check for the billed amount. 

Also arrange to automatically transfer recurring payments to other accounts, such as rent or payments to other individuals. 

Next, set up automatic transfers to your savings. Since you are in the habit of monitoring your budget every month, you know how much money you have left over to apply towards your extra debt payments and your savings. Set this on autopilot and keep your focus where it should be, on finding ways to save even more money!

For the nitty-gritty details on how to automate your finances, visit 15 Tips, Tricks and Tools to Automate Your Savings. 

Recap

So you’re a total failure and you suck at personal finance. 

At least, that’s how you feel sometimes. Let’s face it, we all mess up sometimes. The path to success is not straight and narrow! It is filled with twists and turns and bumps along the way. But that’s perfectly okay! 

Next time you feel like you’ve encountered a bend in the road, grab this list of steps you can take to get back on track. Be sure to print out the checklist and post is somewhere that you can refer to often. Like the refrigerator! This will be your handy reminder so you don’t get led financially astray. 

Good luck!

And don’t forget, you don’t actually suck at personal finance now!

Still feel like you suck at personal finance? That’s okay! Learn how to finally take control of your money by signing up for the 7 Steps to a Financial Clean House email course.