Baby Steps for Improved Personal Finances

If you're finally going to get your finances in order this year, one of the most difficult tasks can be getting started.

There are usually so many financial issues that need to be addressed, it can be overwhelming trying to decide where to put your energy first. The most important thing is to simply begin. To get the ball rolling, consider these steps:

Change your attitude: Make sure you have a positive attitude about tackling financial tasks. If you can't convince yourself that getting your finances in order is a positive step that will reduce stress and make your life better, you are going to fail. Just because the process may be difficult doesn't mean it's something that should make you miserable.

Get a free credit report: To know where you stand and uncover hidden surprises, order a free credit report. Because you can get one free credit report from each of the three major credit reporting agencies, spread them out over the year. This will allow you to see any changes and quickly catch any unusual activities.

Designate a place for tax information: This may seem like an easy thing to do that you can put off until later, but you will thank yourself many times over come April. If you're expecting a refund this year, you might want to start running the numbers early so you can file as soon as possible.

Grab a financial book from the library: If you don't have a personal finance book in hand already, it's time to make a trip to the library. Some to consider: "Your Money or Your Life" by Joe Dominguez and Vicki Robin, "The Total Money Makeover" by Dave Ramsey, "The Wealthy Barber" by David Chilton and "The Millionaire Next Door" by Thomas Stanley and William Danko. Having a book on hand to read in your spare time will ensure that personal finance doesn't accidentally get forgotten. It will also remind you which financial steps to take next.

Set up emergency fund account: If you don't already have a designated emergency fund separate from other accounts, now is the time to set one up. Even if you don't have any extra money right now, that's OK because the key thing is that you don't want funds mixed up. A good solution for many is an online savings account. It's connected to a regular bank account, and you can start it off with as little as $1. Also, it's not easy to withdraw on a daily basis.

Automate everything: Yes, everything. Bills, deposits -- even the new emergency fund. By automating all the things you can, you'll have fewer issues to remember and worry about each month.

Know your debts: It's time to add up all the balances to see how much you owe. Then you'll be in a position to put a payoff plan in place. Decide the order you want to pay off debts -- either the smallest amount first or highest interest first through the snowball method. Once you know, call each credit card company and politely ask if you can have the interest rate lowered. While it won't work every time, a simple request works a lot of the time, especially if you have good credit.

Start tracking your spending: It's difficult to make changes unless you know where you're spending your money. Unfortunately, "I think I'm spending it at ..." isn't going to be good enough. Carry around a small notebook or get in the habit of recording each purchase in a personal organizer or cell phone. Doing this for a few weeks should give you a good idea of how you spend your money, which you can then use to make a formal plan to improve your finances.

Once you have finished the above steps, don't stop. Keep the baby steps rolling. It takes consistency and determination to keep your finances under control. Once you finish one, move on to the next on your list and you'll find that you're well on your way to taking control of your finances come February.

Jeffrey Strain has been a freelance personal finance writer for the past 10 years helping people save money and getting their finances in order. He owns and runs SavingAdvice.com.

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