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Laying your Financial Foundation

One of the easiest ways to take control of your financial life is to get a handle on your money and track your expenses.  Here are some simple steps you can follow:

Start with a plan.

Whether you want to buy a home, purchase a car, or save for a secure retirement, you'll need to start with a plan. Here's how to start:
 

  • Set your goals and timeframe.
  • Review your income and expenses.
  • Determine the cost of achieving your goals.
  • Start savings towards your goals.

Calculate your income.

The first step in your plan should be to evaluate your current income. To do so, calculate your monthly net income or income before taxes. Here's a simple formula for calculating net income:

  • If you are paid weekly, multiply your net pay by 4.33.
  • If you are paid biweekly, multiply by 2.167.
  • If you know your annual net income, divide by 12.

Know what you owe.

Once you determine your net income, you'll want to review your monthly expenses. These expenses include:

  • Your housing expense, which could be your rent or mortgage.
  • Phone charges and other utility bills.
  • Food and entertainment expenses.
  • Other financial obligations:  student loans, credit cards, etc.

Once you determine all your monthly expenses, multiply them by 12.

Easy ways to track finances

How do you track of your expenses? Here are a few ideas.

  • Consider using your debit or credit card instead of cash to track all your expenses more easily. If you use a credit card, be sure to pay off your charges each month to avoid interest fees.
  • Keep receipts to track expenses.
  • Use a personal finance software package, such as Quicken to help you track expenses more easily.
By taking these simple steps, you'll get into good habits and build a budget that can help you control your finances and reach your goals.