Taking Control Step 1: Where are you?

I’ve been working on getting a better handle on my money for over a year now and it’s still a work in progress. Okay, so personal finance is never actually done, but I haven’t mastered my money just yet. Even so I’ve been making progress and here’s what I’d consider to be the place to start.

The first step to take control of your finances is to look and see what you have.¬†Getting a grip on what you have is the financial equivalent of telling GPS to center on your location and you can’t go anywhere without knowing where you are. Just ask any mapping software for directions and they’ll want your current location as well as the destination.

Knowing where you are means knowing:

How much exactly do you have in retirement savings?

How much do you have in cash, checking and non-retirement savings and investments?

How much do you owe, and to whom? What are the interest rates?

If you have bills that you haven’t opened, now’s the time to look. Don’t be afraid, they don’t bite, and even if the amounts are as bad as you’re imagining they’ll only get worse. Seriously, your imagination is probably creating more stress than the knowledge possibly could.

This is also the time to track down old accounts that you no longer use including credit cards, bank accounts and retirement plans from former employers.

If you don’t already, look at your recent pay stubs. How much do you earn before and after tax each pay period? What all is deducted from your pay? If your pay is variable, do you know what your average income is per pay period? If you work for yourself you already be on top of your income, but if that isn’t the case it’s time to get busy.

Finally, make sure you have access to all of your accounts. For most this means a user name, password and website address for logging in through the web. It could mean a phone number to call, or a branch to visit. The point is, if you want to know your balance, make a payment or withdraw money, can you?

I’m failing on that last one. I have a retirement account from an old employer. I have the account number and receive periodic statements in the mail, but in order to make changes to the investment allocation or fill out the form to transfer it to another account I need a PIN. I requested that PIN over a year ago, it promptly came in the mail, then I set it aside to deal with other things. Is that piece of paper in the file folder I should have put it in? Is it buried in the stack of filing that’s been piling up for months? I don’t know right now and need to make it a priority to either find it or request another.

Once you know all of your balances add them up. Now you have a nice big picture of your money.

I have a spreadsheet where I track the balance of all my accounts individually along with a total of all savings, a total for all debt, and a grand total of savings minus debt. I add a new row each pay period with the updated amounts, giving me a running total. With a quick glance I can see just how much is in savings now, or I can study the progress I’ve made since I started tracking it. I haven’t been perfect with my tracking so there are a couple of gaps but it’s still a nice window into history.

If this is the first time you’ve done something like this were you surprised by the totals? Are you in a better place than you thought, or worse?

If you already knew the answers, great! Go get a cookie.

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