Get Organized: How to Take Control of Your Personal Finances (2024)

Money causes a lot of stress. Few people have a firm grip on their personal financial situation and most people were never taught how to manage their money. Even people who were born into wealth don't always know how their debts and assets stand. Thankfully, there are some excellent personal finance apps that can help. These apps can show you how much money or debt you have, analyze your spending habits, teach you how to boost your credit score, and help you make positive financial changes.

If you're new to financial management, keep in mind that:

1) It takes time to iron out any financial situation. You might learn something valuable immediately, but not see real improvement for months.

2) The process of learning is continuous. As your financial situation changes, keep learning so that you can make good adjustments as you go.

Understand How Much Money You Have

A good way to start learning about your personal finances is to see the big picture. How much money do you have? How much debt do you have?

Mint.com is my favorite personal finance tool, in part because it shows you both the big picture and the nitty-gritty details of your money every time you use it. Let's talk about the big picture first.

When you create an account with Mint, you connect the app to all your personal financial accounts, everything from checking accounts to retirement accounts. Mint then tracks the balances of each account, as well as all the transactions that occur in them. It's as if you've logged into each of your financial accounts in the same window. Mint then tallies up all the balances across all the accounts to tell you whether your net worth is positive or negative.

Mint also shows subtotals of your financial accounts by type: cash (checking and savings accounts), credit card balances, investment accounts, loans, and assets (property and vehicles). These summaries help you see how your net worth comes together. Is your debt mostly from a mortgage or do you have a lot of small credit card debts that add up when taken all together? Or perhaps you have more money tucked away in 401K accounts than you realized.

Learn Where Your Money Goes

Once you have a sense of how much money and debt you have, you can analyze your spending. If the majority of your day-to-day spending occurs on credit and debit cards, Mint is once again a great tool for this job. If you typically pay in cash, you need to start by writing down everything you buy. You can do this in Mint if you like because it has an entry field for cash spending. Or you can use an accounting app such as Quicken or FreshBooks, or even a simple spreadsheet. In any event, log every purchase you make. Include the date, category of spending (such as rent, clothing, or entertainment), and amount. After about three months, you should have enough data for it to be useful.

For those who use credit and debit cards, the process is much easier. When you log into Mint, you see not only all your balances, but also every line item transaction on every account. This means you already have a history of your spending.

Mint automatically categorizes each transaction, which you can change if it's wrong. The app also adds up each category to show how much you've spent this week, month, quarter, or year on everything from coffee shops to booze.

A pie chart shows the totals for your top categories with a link to all the transactions so you can evaluate them. Perhaps you spent an unnecessary amount of money on travel. You can click through to the transactions and decide for yourself exactly where you overspent.

In looking at spending patterns, it's easy to dismiss overspending by saying, "Well, this was an unusual month." Before you jump to that conclusion, check whether your spending in previous months was similar. Sometimes we spend in ways that we don't even realize. Seeing the data makes it harder to come up with excuses.

Decide What You Want to Change

Figuring out how much money or debt you have and where you spend your money puts you in a position to think about what you want to change in your financial life. Do you have a retirement plan? How urgently do you need to pay off your debts? Should you diversify your investments? How much money should you keep in an emergency fund?

Your financial situation is unique, and so are your financial goals. As you think about what you want to change, read up on those specific topics. Two excellent resources are NerdWallet and LearnVest. These sites have articles and advice on all matters of personal finance, from how to pay off a debt to an explainer piece on wedding insurance. NerdWallet has debt payment calculators

Make a Budget That Works for You

Often, when people first get a handle on their personal finances, they think they need to create a budget.

Budgets aren't one thing for all people. A budget can be a strict limit on spending for every possible category. Or it might be a calculation for only a few select categories, such as rent and travel. Some people never formally calculate any kind of budget and instead do it by feel: "Given my current lifestyle, I enjoy life without spending too much, and I'm able to meet all my financial obligations."

Budgets are extremely useful for making tradeoffs. If you notice that you spend more money than you'd like on luxuries and at the same time are not meeting your financial goals, a budget helps you direct your money where you want it to go. For example, let's say you noticed that you spend $300 per month on takeout lunches, and one of your goals is to save around $2,000 per year for a vacation. If you cap your lunch spending at $100 per month, you'll easily have enough money for a great holiday. Now it's just a matter of diligently limiting your lunch spending and socking away the excess cash.

Mint has great tools for budgeting, especially if you take a more casual approach to it. People who are hardcore into budgeting often recommend a tool called You Need a Budget (YNAB). In YNAB, every dollar of income must be assigned a purpose, whether it's to pay for expenses or go into savings. It takes a while to learn to use YNAB, but once you get it, your money will be thoroughly budgeted.

Work Out How Fast You Can Pay Off Your Debts

If you can afford to pay your debts faster, should you? To figure out the answer, you need to do some math. If you have a fixed loan with a low interest rate, you might be better off paying the minimum, depending on what else you need to do with your money. If you have credit card debt with a high interest rate, you can probably save a lot of money in the long run by paying it off as quickly as possible. It's hard to know.

Debt calculators can show you how much you can potentially save when you pay more than the minimum amount due each month.

Personal finance app WalletHub has a debt calculator that I like for two reasons. First, it's very simple and straightforward to use, and you can play around with the numbers without reloading the page to see how much money you can save by increasing your payments. Second, WalletHub finds your debts by looking at your credit report, so it pulls the total amounts due automatically. When I used this calculator recently, it automatically knew from the data it was pulling the minimum monthly payment the lender would allow.

The upshot of your examination may very well be that you can't afford to pay off your debts at all, right now. If that's the case, I'm sorry; it's a tough situation, and one that many people face. But at the very least you're now armed with actionable knowledge instead of struggling with fears of the unknown and guilt at avoiding the problem. Hopefully, your situation will improve. In the meanwhile, you'll have a much tighter grip on your money, which should help you make informed decisions. That in itself is a huge step forward.

Understand and Improve Your Credit Score

Another common financial matter to address is your credit score. Credit scores are truly confusing, but you could be at their mercy for other financial matters, namely, when you need a line of credit. Whether you want to apply for a mortgage or open a new credit card, your credit score will come into play.

Unpacking credit scores—Who creates them? What goes into them? How you can access yours?—is a bear. The fastest way to get your hands on what you need is by using WalletHub or Credit Karma. Both are free.

WalletHub pulls one of your credit scores (with your permission) and then essentially creates a report card for you that explains how different factors in your financial history influence the score. It's all specific to you. For example, you might get an A on using credit responsibly but a D for taking on more debt than your reported income seems to support. WalletHub explains these different factors clearly in a way that gives you insight on what you need to change to boost your score.

Credit Karma has a similar report card, only it doesn't use letter grades. Plus, Credit Karma looks at two credit scores from two different reporting agencies, letting you see whether they differ. Credit Karma includes information about how much impact each factor has. For example, your payment history has a high impact on your credit score, but your total number of accounts has a low impact. With that information, you can see which factors you should focus on changing to raise your score.

Apps Can Help You Master Your Money

Like any lifestyle change, getting your personal financial situation where you want it to be takes constant vigilance, at least at first. It gets easier the more you learn and the longer you keep good financial habits. By using some of the apps suggested here, alongside professional financial advice when you need it, you can create a long-term plan for your money and remove some unnecessary stress in the process.