The only place to know where you’re going is to know where you are right now. This may sound a little existential, but it’s the most vital step in getting your financial house in order. Sit down with your hubby and put everything down on paper, in an excel spreadsheet, heck, maybe this is your excuse to buy that adorable little notebook you’ve been eyeing at the store. However you do it, you need to get a snapshot of your finances right now. Here’s how to start:
Write down your after tax income.
Whether one of you works, or both do, write down any source of money coming in. If you get alimony, or child support, add that too. If one of you works on commission, or through sales and your income varies, guestimate the lowest average amount you’ll receive on a monthly basis.
Write down your total debt.
Credit cards, auto loans, mortgages, personal loans, student loans, the $20 your grandmother loaned you when you were 8. Write it down! It may be painful to look at your debt straight in the eye, but no amount of bargaining is going to get rid of it. Later, when we make a budget, you can put a plan into place to tackle this debt, but for now you just need to know how much is there.
Make a note of your bank accounts, as they are right now.
Make a note of all of your accounts. Whether its savings, retirement, 401k, a CD, in investment, checking account, etc. You need to know how much money you have out there and where it’s living. I did this recently and realized that while a had $6,000 in savings, that was earning me 1%, it wasn’t earning me nearly as much as I was spending on my auto loan. To every $200 I paid on my auto loan, $40 of that was interest. It wasn’t until I had everything out on paper that I realized that $6,000 would serve me so much better paying off my loan than sitting in my savings, making me 1%.
Write down all of your monthly expenses.
Begin with the steady ones, that are the same every month, and that you can’t get away from: auto loan payments, rent, child support, etc. Next, look over your last couple of months expenses and see what you paid on average for things like utilities, food, gas, entertainment, etc. However many categories you need, use. Always estimate high, rather than low. This will give you an idea if there is any money left over at the end of the month or if you are regularly in the red, every month. Don’t try to sugar coat this process and don’t give yourself amounts of what you will pay. This is a snapshot of your financial house right now. Later we can play with the numbers.
Write down your financial goals.
Yes, this is part of taking state of your financial house as-is. Have you ever asked your hubby what his financial goals are? They may be completely different from yours, and completely different from what you thought they were! If you have multiple goals, list them in order. For us it was 1. Pay off debt (both credit card and auto loans), 2. Bring R’s daughter here to visit for the summer, 3. Pay for a trip to Boston (R’s a HUGE redsox fan), 4. Have a 6 month emergency fund (this is more my priority than his), 5. Buy an off-road rig. Knowing this, whatever money is left over at the end of the month goes directly to our #1 goal and there’s no discussion about it. In fact, we work very hard to come in under budget every month specifically to reach these goals sooner. But again, unless you know what you want, how exactly can you work toward it?
When in your relationship did you start talking finances with your hubby? What are your financial goals? Has writing down your finances helped you reach those goals? Please share your stories below!