For almost all of us, taking care of our personal finances is definitely an arduous task. Easy accessibility to credit, high interest rates as well as a lack of knowledge ensure that a large proportion of families in North America are actually living deep in debt and way beyond their means.

Money is neither good nor evil. It is merely a tool which can be used to suit our needs and/or desires.

If we’re not shown how to manage money at a young age then how do we learn? For the majority of us it’s baptism by fire and, with nearly 60% of North Americans living paycheck to paycheck, it’s clear that most of us are falling short. The reason many men and women are struggling with handling money is actually quite simple.

In the very early years of working, when money is tight, we don’t believe we’re making enough in order to put anything aside or develop anything even remotely looking like a ‘financial plan’. As our earnings scale up, we very quickly consume this additional cash and revel in our new-found freedoms.

The degree of debt which we carry is in direct proportion to our income since this is exactly where our comfort levels lie – not quite sufficient debt to keep you awake each and every night, yet just enough to enjoy life and your hobbies to the maximum of your income level.

You may feel like you are on a tightrope, staying on top, but hoping not to fall.  Here are some tips to help you manage your personal finances.

1. Plan your Goals

Because a goal without a plan is really just a wish: To be successful with nearly anything you first will want to have an idea of two things:

• Where you’re going – your GOAL
• How you’re going to get there – your PLAN

Create a list of every one of your short, medium and long-term goals. Include anything and everything which will likely have a substantial financial commitment – retirement, holidays, large purchases, building an emergency fund, etc.

Begin to work out exactly how much you have to put aside each pay period to reach these goals.

2. Be sure that you have more money coming in than is going out

Your after-tax income MUST be greater than all of your expenses. If it’s not, there are only two choices – either lower your expenses or increase your income.

The majority of us believe that there’s no way we can decrease our expenses. Budgeting should show places where money is bleeding out and you can minimize expenditures. While this may require a temporary change in your way of living, it will be a small price to pay and will likely get you a great deal further ahead.

3. Use CASH for discretionary spending

There’s something about looking at your very last $20 bill and recognizing that you still have 4 days left before you are ‘paid’ again! It genuinely can make you re-evaluate if you truly need to have that $5 cappucino or if a regular coffee will do the trick.

Having a strict amount of money to spend on discretionary purchases each week and spending cash to get them will go a long way to making certain your long-range goals are fulfilled. It’s also much easier to track and to hold one another accountable.

4. Develop flexible spending funds

Build up funds for large purchases or repairs. For example, put enough into your Auto Expenses Fund to cover loans, insurance, registration, taxes, repairs, and maintenance.  In your Home Fund, be sure to add enough to cover your monthly mortgage payment, taxes, insurance, maintenance, and repairs.  To find out how much to add to your designated funds every pay period, look back at how much you spent in the past 12 months on these things.  Add them all up, and then divide that number by the number of pay periods in 1 year (12 if you are paid monthly, 24 if you paid bi-monthly, and 26 if you are paid every 2 weeks).  Find out more about building funds here.

5. Monitor spending and tweak as required

Always keep consistent track of every single penny coming into the home together with every penny being spent. Take note of receipts, be liable to yourself and your significant other, and above all, be prepared to change your spending habits as life unwinds.

Sit down weekly (planning retreat) and go over the past week’s spending and forecast the coming week’s expenses. Identify any upcoming expenses that will be out of the ordinary – business meals, unexpected vehicle maintenance, doctor visits, etc., and prepare your budget.

It takes a bit of time and willpower as well as staying accountable for exactly what you are trying to achieve.

Remember, Rome wasn’t built in a day! Neither will your future be built in a month or even a year… and yet the transformation to your personal finances – and the possibilities for an abundant future – will definitely be well worth the sacrifice!

Members to ListPlanIt will find everything they need to better plan and organize their finances in Financial Planning.  Not yet a member?  Join today and start making sense of your money. Or, check out ListPlanIt‘s newly updated Finance ePlanner today and get 20% off with the following coupon code:  FINANCE20