7 Steps to Getting Your Finances Under Control

You can put yourself in a better financial position and feel more confident about the future by following these practical techniques.

7 Steps to Getting Your Finances Under Control - Couple Going Over Finances Using a Calculator and Laptop

by NEA Member Benefits

Key takeaways

  • Track your spending so you don’t spend more than you have.
  • Organize bills, balance statements and pay all accounts on time.
  • Build a rainy-day fund to cover unexpected emergency expenses.
  • Contact a certified credit counselor if you need help getting your financial house in order.

Arlene was having coffee with her friend Sarah when the subject of finances came up. “Sometimes I feel like I’m just barely keeping my financial life above water,” Arlene said. “I’m sure I can do a better job of managing my money. I want to feel confident about my future!” Sarah gave a knowing smile. “I felt the same way a few months back. But then I found some great tips from the National Foundation for Credit Counseling (NFCC). I followed their advice and now I’m more in control of my finances and feeling better about my future.”

Incorporate these action steps into your daily routine one at a time. Once you get to number five, you’ll be walking on more solid financial ground.

1. Live within your means

Credit cards may be convenient but sometimes they make it too easy to spend more than you have. Put the cards in the freezer and try shopping with cash for a while. People who do this typically spend 20% less. And they don’t feel deprived. You’ll buy what you want, but with more awareness of how much you’re spending, and you’ll keep the frivolous purchases to a minimum. Eventually, you’ll be able to pull out a credit card and use it conveniently and responsibly.

2. Know where your money goes

Have everyone in your household who spends money track their spending for 30 days. At the end of the month, figure out where the spending is going off the rails and commit to getting things back on track. This will put you in charge of your household cash flow.

3. Get financially organized

Are you late paying your bills? Are you drowning in financial paperwork? It’s time to get organized so you can avoid late fees and keep your credit scores in the healthy range. Here are a few organizational tips:

  • Go paperless. Have statements and payment reminders emailed or texted (or both). It’s good for the environment and makes it less likely you’ll miss a payment.
  • Consolidate the clutter. Keep all paper bills and invoices in one location so nothing gets misplaced.
  • Decrease the plastic. If you’re not going all cash (see #1 above), try to limit yourself to just one credit card. Opt for one that does not charge an annual fee and pay it off in full every month to avoid interest charges and overspending.
  • Tidy up. Shred ATM receipts and bank deposits once they appear on your statements. You can shred other statements such as utility bills and credit cards after you’ve reconciled them.

4. Balance your checking account

It’s a good fail-safe to have overdraft protection on your checking account. But make it a game to never go into the overdraft. Log every check, deposit and withdrawal in your check register, including all debit and ATM transactions. Regularly balance your checkbook, and reconcile your bank statement as soon as you get it. This will help keep your account from going into the red.

5. Build a rainy-day fund

Once you have your spending under control, you can start socking money away to cover unexpected expenses, such as auto or appliance repairs or a trip to urgent care due to illness. Many experts suggest aiming for an emergency fund with three, six or even 12 months of living expenses in a readily accessible account. Don’t worry if you can’t save this much. Even a small amount can help you cover minor expenses and limit adding to your debt. And continue to save for retirement.

6. Monitor your credit history

When it comes to your credit score, bigger numbers are better. The FICO credit score is the most common. A score under 580 is considered “poor,” while a score of 800 or above is “exceptional.” The national average reached a record high of 706 in 2019, which is considered a “good” score. Your score reflects your payment history, the amount of debt you have, your credit history and other factors. Many credit cards now offer you a look at your FICO score right from your online account.

Here are few ways you can improve your FICO score, courtesy of myFICO:

  • Pay bills on time
  • Get current with any missed payments
  • Keep balances low on credit cards and revolving credit accounts
  • Don’t close unused credit cards
  • Don’t open lots of new accounts within a short period of time.

Request a free copy of your credit report from each of the three big credit reporting agencies—Experian, TransUnion, and Equifax—once a year at annualcreditreport.com. This will help you spot any problem areas early. To keep an eye on your credit history throughout the year, request a free report from a different agency every four months.

7. Get some professional advice

The NFCC Member Agencies each year help millions of people build financial stability. If you need help recovering from a financial set-back or just want to get your finances even more organized, reach out to an NFCC certified credit counselor. Call (800) 388-2227, or find a counselor online. Assistance in Spanish is available here or by calling (800) 682-9832. (Asistencia en español está disponible aquí o llamando al (800) 682-9832.)