First steps to taking control of your finances

The more certainty you have regarding your finances, the more your life’s big goals are able to come into focus. While everyone's financial situation is unique, here are some steps you can start taking today to take more control of your finances. 

1. Understand how money flows into and out of your household 

A great place to start taking control of your finances is with a clear understanding of how much money is coming into your household (income) and how much is going out (expenses). With this knowledge, you can create a monthly budget that ensures you spend less than you make and enables you to put money aside each month for your future. To get started, add up your income and your expenses: 

Subtract your expenses from your income. A negative number means that your spending currently exceeds your income. This is the exact moment you know to reduce expenses — for example, by canceling unused subscriptions or cutting back on dining out. Also look for avoidable fees that you can eliminate from your monthly expenses. 

A positive number suggests that your spending is under control. Take a moment to congratulate yourself! Next, you can focus on ensuring all your income serves a purpose, getting you closer to your future goals. 

2. Be ready for any financial emergency 

After making any necessary cuts to control your spending, you will also want to provide yourself security for when the unexpected happens. Having a fully funded emergency fund helps prepare you for financial emergencies ranging from sudden medical bills to car trouble. 

In general, a good rule of thumb is to have an emergency fund that is equivalent to three to six months of your expenses (many financial planners agree). You can work toward this benchmark over time — some emergency savings are always better than none. The best place to keep an emergency fund is in an account you can access at any time without paying a penalty while also earning dividends, such as UNFCU’s high-yield savings account. 

Another smart step is to place your emergency fund in its own dedicated account to avoid accidentally spending your emergency fund. 

3. Simplify further saving through automation 

To keep your emergency fund growing and to save toward these goals — retirement, a down payment on a home, a long-awaited vacation — setting up automatic deposits is a powerful tool. After a bit of initial setup, your savings will be able to grow each month with no further action required. Routing money directly into your savings also bypasses the temptation to spend everything you make.  

With payroll deposit, you can choose how much of your pay to place automatically in each of your accounts. Your employer or pension fund can help you set up this service. 

4. Tackle costly debt 

Debt is an area where many feel less control over their finances than they would like. A valuable first step to getting debt under control is knowing the interest rates of your loans and credit cards. Higher interest rates are more expensive over time, so prioritizing these expensive debts for payoff is a popular choice. For example, credit cards tend to have a high APR (annual percentage rate), which is why we also recommend paying your credit card balance in full each month. Alternatively, you could choose to give yourself some easy wins by paying off your smallest debts first. 

Paying more than the minimum monthly payment amount whenever possible will help you eliminate debt faster. You can also consider transferring a balance to a credit card with a 0% introductory rate, with the goal of paying off your balance before this introductory period ends. Finally, consolidating debt under a debt consolidation loan is another tool that may help you pay less interest over time.  

5. Review and adjust as your situation and priorities evolve 

You know how much you have available to spend and save each month. You have an emergency fund to address unexpected expenses, and savings that grow automatically each month. You are on a path to decreasing your debt. What comes next?  

You can preserve your growing control over your finances by reviewing your setup at least once a year. This can help you respond to new developments, such as a subscription amount changing.  

Changes to your financial situation are also important moments to check in. Examples include:  

• A new job or salary change 
• Leaving or losing a job 
• Moving 
• Marriage  
• A new child 

Lastly, if your income increases, you may choose to save more each month or make larger payments toward your debt. Most importantly, finding an approach that works for you and evolves to match your current situation will keep your finances organized, manageable, and under control.