This is a guest post from Trisha Wagner, who is a freelance writer for DestroyDebt.com, a debt community and debt forum. Trisha writes regularly on the topics of getting out of debt and personal finance.
Money isn’t everything…….right? Of course not, and each of us know this; however money (or in many instances the lack of it) tends to have a HUGE amount of control over our lives. The last several months have brought money and the importance of it into each of our homes every day. You would be hard pressed to read a newspaper, watch the news or surf the internet without finding dozens of stories lamenting the current economic crisis. Do you feel that money has taken control over your life: either the quest for it OR more likely the quest to pay off mounting debt? To take back control you must first have a solid understanding of your financial situation.
Understand where your money is coming from.
For most people knowing where your money is coming from is not terribly complicated. The main source of income for many people would be their job. Additional sources of income may include: interest income, dividends, partnerships and tips. If you don’t want money to control your life, you must first not only know where your money comes from but also the stability of that income. Ask yourself these questions to help determine if your income is risky or stable:
Who signs your paycheck? The source -such as an individual, a private or public company, the government or yourself contributes to the stablity of your income.
Do you get paid on commission, hourly or do you count on heavy bonuses?
Will periods of slowdown affect my employers ability to pay? (construction, retail or seasonal work)
Understand where you are spending your money.
This concept is actually very simple and has been covered extensively on various forums so I will not spend a lot of time covering this topic. Basically you must know where your money is going. If you do not know how much you are paying on what, start today and begin tracking your expenses on a daily basis. Pretend you are a corporation, separate your expenses by fixed, variable and one-time/unusual expenses. If you discover you need to cut costs you will have a better idea where to begin if you know what areas can be cut.
Understand where you are investing or saving your money.
You can either spend your money today or save it for the future. Either way you must know where you are putting your money. If you are not investing in the future, research the best deals on banking institutions so you money is at least earning interest. If you are investing your money, keep your finger on the pulse of your investments. If you give up control of your money to someone else to make the decisions you cannot complain when those decisions are wrong. Think independently and take responsibility for your choices.