Five Steps to Financial Stability

There are five steps you must perform that will help you pay off your debt and get you back on track to financial stability. The steps consist of: evaluating your current financial situation, defining what you want out of a budget or your financial goals, developing a plan of action, implementing your plan, and reviewing, reevaluating, and revising your plan. I know this all sounds like it requires a lot of effort but financial stability is worth it. You are not alone in this, everyone experiences debt some point during their lives.

The first step is to evaluate your current financial situation. I recommend keeping track of where your money is being spent for a month. If you have a bank account through one of the larger banks, they have already done this for you. If not, you will need to categorize your expenses. Utilities, entertainment, auto/gas, education, groceries, and veterinary expenses are only a few categories that you can use. The type of categories will depend on your personal expenses. Microsoft Money and Quicken are two forms of software that help you keep track of your finances.

The second step is to define what exactly it is you want out of a budget. Goals can be placed into three categories: short term, medium term and long term. Short term goals are goals that you do not require longer than a year to pay off. Medium term goals are goals that require longer than a year but less than five years to pay off. Long term goals are goals that take longer than five years. Some short term goals include purchasing a new stereo system, an entertainment system, a small computer, etc. Purchasing a new refrigerator, stove, and vehicle are a few examples of medium term goals. Some long term goals include purchasing a home, boat, or tractor, investing in a 401K plan, and paying off an education loan.