Free From Broke Guest Post: How to rein in your personal finances.

By Free From Broke

Personal finance is both easy and difficult. On the one hand, it’s really a matter of some simple math (make more than you spend). But on the other hand, it’s extremely difficult because we have to get past all of our wants and bad habits.

Here are some steps to help you take control of your finances.

1. Know how much you make. No, it’s not what your gross paycheck is for the year, which is what most people think of as their salary. I’m talking about the net amount of your paycheck; the amount that actually goes into your bank account. That is, the income you actually take home each month that you can spend (or save).

2. Know what your expenses are. Gather all of those bill receipts and add them up. Make sure you include your rent/mortgage, insurance, utilities, car payments, transportation expenses, cable, insurance – anything that you are paying regularly every month. If you don’t have the actual bills, then check your accounts to see what was taken out in the past. Add all of these up.

Quick quiz - Does what you make amount to more than what your expenses are? If they aren’t, then you need to take a close look at your expenses and see what you can cut out. You should also consider ways to make more money to cover your expenses.

3. Know your spending. This one is a bit tougher because it can change from month to month. But it’s important to get a good idea of what your spending is. If you need to, record what you spend every day for a month and see what it amounts to—this includes entertainment, shopping, food, or anything else you are paying for. You need to know where your money is going. Without a true figure you are just guessing and you really won’t be able to get a grasp on your personal finances. Be HONEST. Lying about your spending will not help you.

Test Time – Add up your expenses and your spending. Is it more or less than what you make every month? If it’s more, then you need to find ways to reign in your spending and/or figure out ways to make more money. It’s as simple as that. To use business terms, you’re “in the red.” You’re in debt. How are you paying for your expenses and spending? Credit cards? It’s not a good route and can potentially cost you thousands in the long run (if it hasn’t already).

But if you’re making more than your combined expenses and spending, then that’s awesome! What are you doing with the extra money? Do you have an emergency fund set up? Extra savings? Retirement? Insurance? Investments? These are things you want to look into to make sure your money’s working for you now and in the future.

Recap: Expenses + Spending > Income = BAD. Expenses + Spending < Income = GOOD.

That’s the whole equation to getting a handle on your personal finances in a nutshell. Is it a bit over-simplified? Yes, I’ll admit it’s a bit simple, but it’s easy enough to get a good look at where you are with your personal finances and to take next actions.

It’s never too late to take control of your finances, no matter how bad it may seem. I overcame thousands in credit card debt and mine is just one story among many of overcoming debt and getting a handle on you finances (and I’m far from perfect now, but I’m working on it). You can do it; you just have to be willing to do what’s needed. Add up your expenses, spending and your income and see how your money equation comes out. Take control of your finances.

Read more Free From Broke at http://freefrombroke.com or visit his Twitter profile.