Managing your money essentially means that you know what you have, you know what you spend, and you know where you’re trying to go, financially speaking. You’ll want to get started on your two most basic financial components: making a balance sheet (also your net worth statement, this shows all you own, minus all you owe); and your income statement (also called cash flow, this shows your income and expenses during a specific period, usually over a month or a year.) Once you have these, you can start to budget, or direct your money where to go.

Money talk can be taboo and intimidating. But I promise you, it doesn’t have to be. Information is power – by developing a solid understanding of these two main aspects of your finances, you’ll be building a great foundation for your own personal financial management.

BALANCE SHEET

Creating a balance sheet is a great process to go through, and when you start thinking about estate planning, it will be infinitely helpful to have one complete list of your assets.

It’s easy! Sit down (alone or with your partner) and make a list of all of the following (or download my balance sheet excel template HERE, or my printable balance sheet HERE.)

1. Checking Account(s)
2. Savings Account(s)
3. Brokerage/Investment Account(s)
4. Individual Retirement Accounts (IRAs – these are ones that you’ve opened yourself and either funded directly with contributions, or rolled over balances from past retirement accounts)
5. Employer-sponsored Retirement Accounts (401(k), 403(b), Pensions, etc), current or past
6. Other accounts (old 529s that have a remaining balance; 529s you’re funding for your children, Health Savings Accounts, etc.)
7. Noncash Assets: House(s), car(s), boat(s), valuable jewelry, paper stock certificates, paper savings bonds, etc.

In my house, we include the institution where the asset is held (Bank name, retirement sponsor, etc), the account number, the balance (I update monthly-ish), and we have the initials of the beneficiary* listed on the account.

Next, compile a list of your debt(s). This will include everything you owe beyond the next 30 days, so you can leave off the water and electric bill here. If you’re in a lot of debt, this can seem overwhelming and tempting to just NOT. But it will be empowering to have everything in one place, especially when you start crossing things off the list – promise! Remember to include:

1. Student Loans
2. Mortgage
3. Car Payment
4. Consumer Debt (bank credit cards or individual store/merchant credit cards like Nordstrom or Home Depot cards)
5. Outstanding debt to people (friends or family)
6. Medical Debt
7. Collections
8. Anything else

Once you have everything listed, subtract your total Debt from your total Assets. That’s your Net Worth!

INCOME STATEMENT

To track the movement of your money over time will take just a bit more research, but it’s easy too. We’re not cash-heavy in my hosue, so my favorite way to do this is to logon to any accounts that process outgoing payments, and download the monthly transactions and categorize them directly into Excel. For us, some expenses come directly out of checking, most go on an air travel rewards credit card that we pay off each month.

Creating a list of categories can be overwhelming, but I like Dave Ramsey’s approach to budget categories, outlined HERE, or you can download my personal budget template that I’ve been finetuning for 10+ years HERE. Basic budget categories can include anything, but these are a great start:

• Housing
• Food
• Utilities
• Transportation
• Health./Medical
• Insurance
• Childcare
• Lifestyle & Entertainment
• Personal Spending
• Miscellaneous
• Saving
• Giving
• Debt

Going through about 3 months’ of spending will likely give you a good idea of how much you’re spending in each of these categories. If your goal is to cut spending, you’ll have enough knowledge of your spending habits to know where to start.

CREATE A PLAN

Congratulations! If you’ve made it this far, you’re now part of only one-third of Americans who know how much money they spent last month! From here, I recommend following Dave Ramsey’s Baby Steps:

1. $1,000 starter emergency fund
2. Pay down all debt, smallest to largest, using the snowball method
3. 3-6 months’ expenses fully funded emergency fund
   • 3(b): Save for a down payment on a house
4. (Baby Steps 4, 5 & 6 are simultaneous): Invest 15% of household income in savings for retirement
5. Save for children’s college
6. Pay off your house early
7. Build wealth and give

Heads up – if you made it this far, you’re now officially managing your finances!

-Angie

*Beneficiaries are the people you select to receive an asset after you die. Often you designate a beneficiary when you set up an account; if you don't select beneficiaries, depending on the asset, it will usually go your estate and pass according to your will, or without a will, it will pass to your next of kin, according to your states "intestate" laws, or laws that say where your assets go if you die without a will. Long story short, if you want to decide who gets your money when you pass, select beneficiaries and write a will!