Calculate Your Net Worth
As a first and very necessary step, we recommend you to calculate your net worth. We know it sounds very intimidating and does not imply any fun at all, but we guarantee that this task will help you tremendously with further steps. Make one list of all your assets and savings: check account and saving account balances, assets of significant value, retirement account, etc. Make another list of all the things you owe: student loan balances, medical and credit card debts, etc. Knowing exactly what your net worth is can be a good stepping stone, as people feel more motivated to make a change going forward. Moreover, it’s going to be easier to keep finances organised from that point onwards.
Track Daily Spending
Writing down your spending helps you be more aware of your financial picture. We recommend using various smartphone apps that track you financial daily inflows and outflows. However, the good ol’ pen and paper will do the trick just fine. The more aware about your spending, the more likely you are to make sensible and practical decisions with your future finances.
Rank Your Monthly Expenses
Reducing monthly expenses is a sure way to get your spending under control. However, if you are struggling to decide which part is worth cutting, we recommend ranking the expenses in order of importance. Then you can try cutting the bottom-ranked items or services. Another way would be to cut down your largest variable expense by at least 20%. Overall, there is no need to do any radical changes, however every small step counts towards better, more solid money habits.