Gain Control Of Your Finances In 5 steps

Would you like to start off 2007 on firm financial footing? By following these five easy steps, recommended by the New York State Society of CPAs, you can gain control of your finances before year end.

Assess
The first step is to assess your current financial situation. Start by calculating your net worth. List all your assets (what you own) and all your liabilities (what you owe). If your assets exceed your liabilities, you have a positive net worth. If you have more liabilities than assets, your net worth is negative. At the end of each year, recalculate your assets and liabilities to determine your progress toward building your net worth.

Identify
Once you have a clear idea of your financial picture, you should set financial goals. Whether your plans call for buying a home, taking a vacation, retiring early, or paying off debt, your financial goals help you determine what is important to you. Financial goals also serve to motivate you - it’s always easier to save money when you know what you are saving for.
CPAs recommend that you divide your goals into short-, medium-, and long-term goals. Be sure each goal is focused, realistic, measurable, and has a specific target date. You should review your goals regularly and make adjustments when necessary.
Budget

Your next step is to create a budget that will help you attain your financial goals. The key is to spend less than you earn. The first step in preparing a budget is to figure out your current cash flow. Start by adding up your income from your salary, bonuses, investment income, and any money you get from other sources.

Next, track all your expenses for a month or two. That includes regular expenses, such as your mortgage or rent, food, transportation, insurance, and credit card payments, as well as discretionary expenses, including entertainment, dining out, and gifts. Be sure to factor in expenses that do not occur every month.

It’s important that you record every dollar you spend, whether it’s with cash, check, or credit card. Seeing how you are spending your money will help you determine where you can make cuts and redirect that money toward meeting your financial goals.
When creating your budget, be sure to pay yourself first. That means deciding how much you can save each month and treating it like any other bill. Better yet, have the money automatically deducted from your paycheck and deposited into a savings account. You won’t miss what you don’t see.

Manage
Managing debt is a critical step in gaining control of your finances. If you are carrying a high level of debt, make paying down your credit cards a priority. There are several strategies you can use, such as consolidating your debt on a credit card with a lower interest rate and/or paying off high-interest debt first. But the best way to reduce debt is to double or triple your card’s minimum monthly payments. Depending on your balance, higher payments could save you thousands in interest payments and shave months, or maybe even years, off your debt.
Prosper

There’s a great deal of peace of mind that comes with gaining control of your finances. If you need help in completing these steps, contact a CPA. He or she can work with you to create a plan for achieving your financial goals.