How to Take Command of Your Money

Your personal financial assessment.

Do you wish you were in control of your finances? Do you want to relieve financial stress?

Well stick around, grab a cozy chair, and make yourself at home — we’re going to walk through how to take command of your money.

We’ve talked about the “why” behind being in control of your money (read me first). Now, we’re going to talk about the “how.”

This post will help you determine the current status of your financial profile. Think of it as a self-assessment. I can’t say it’ll be as exciting as a Buzzfeed quiz on what kind of cave you are (yep, that’s a thing), but I can promise you’ll learn something about yourself.

After reading this and following a few actionable steps, you’ll have an estimate of your net worth, a blueprint of your spending habits, and an estimate of your net earnings.

And you’ll get to meet Petunia!

Here are 9 key questions you need to answer.

Figuring out your assets

1. How much money do I have?
2. Where is this money located?
3. What other assets do I have?

The first couple of questions might seem a little vague. The idea is to figure out how much money you have across all possible locations — from your wallet to your retirement account. Here are a few examples of where it could be:

• Checking accounts
• Savings accounts
• Brokerage accounts
• Cash management accounts (CMAs)
• Individual retirement accounts (IRAs)
• 401ks
• Pension plan
• 529 plan

The last question targets your “other” assets — like your car, house, boat, collectibles, jewelry, etc. Really anything of material value. You might have to do some guesstimating here — or you can scan a few online marketplaces (like Kelly Blue Book for your car, or eBay for collectibles) to determine value.

The total of all of these items — plus your cash/investments — is the value of your assets.

Knowing how much money you have and where it resides is a key first step to setting up your infrastructure.

An example: Meet Petunia. She’s a 28-year old elementary school teacher that loves animals — and occasionally volunteers at the local shelter. Her guilty pleasure is battle rap.

Backstory is fun.

Petunia is smart and stays on top of her finances. Good for you, Petunia. She has $500 in cash under her mattress, $5,000 in a checking account with her local bank, $30,000 in her retirement plan, and another $20,000 in a portfolio of stocks and bonds that’s managed by her advisor. She also has a 2006 Dodge Durango (license plate: SCLZOUT) with a Kelly Blue Book value of $1,500.

Based on this information, Petunia has $57,000 in assets. Of this amount, $5,500 is immediately available (her portfolio could be sold and cashed out, but that would take time).

What is Petunia missing?

Petunia is killing it — but she needs an emergency fund. Her checking account should have two to three months of expenses at most. Anything beyond this should be moved to a high-yield savings account, which will serve as her emergency fund. Petunia should focus on allocating earnings to this account until it totals around six-months' worth of expenses.

(Read me next)

Figuring out your liabilities

1. How much debt do I have?
2. What kind of debt is it?

These questions determine what you owe for what you have. School loan for education, auto loan for your car, mortgage for your house, etc.

Here are a few types of debt

• School loans
• Auto loans
• Mortgages
• Credit cards

Let’s check in on Petunia’s liabilities. She went to college and got an early education degree — but she had to incur $50,000 of student debt in the process. Ugh, isn’t tuition ridiculously overpriced?

Petunia has been out of school and repaying this loan for six years, and now has a remaining balance of $8,000. Throw in credit card debt of $1,000 and she’s got $9,000 of liabilities. With this number, we can determine that Petunia has a net worth of $48,000 ($57,000 of assets less $9,000 of liabilities).

Not bad, Petunia. Not bad at all.

Figuring out your net income

1. How much am I making?
2. How many sources of income do I have?
3. How much am I spending?
4. What am I spending my money on?

Our first two sets of questions formed a personal balance sheet (assets -liabilities = net worth). The third set will help you craft your personal income statement.

If you’re salaried and don’t have any secondary sources of income (side jobs, investment income), it’s pretty easy to determine how much you’re making.

If you’re hourly, it’ll take a bit more time to track your income.

One of the primary goals of personal finance is to accumulate wealth. Another major goal (that plays directly into accumulating wealth) is having multiple sources of income. Like freelance writing or driving for Uber in addition to your day job. Or even better, receiving rental income from real estate.

Multiple sources means you’re bringing in more money and less reliant on any one source. If you only have one source, that’s totally fine — and pretty much the norm. It doesn’t hurt to think of some possible side jobs though.

The best way to figure out how much you’re spending and what you’re spending money on is to create a budget. Eww, gross. Yeah, yeah. I know.

But if you don’t budget, (1) you don’t know how much you’re really earning each month, and (2) you let bad spending habits go unnoticed, which leaves money on the table.

Budgeting keeps that little voice in our head that says “ahhh screw it, you deserve those $200 sunglasses” in check. I’m not saying you can’t have nice things. Budgeting just lets you know how often you can splurge and what you can splurge on.

I’ll say this now, and I’ll say it again. It’s much easier to control your expenses. Making more money is just more time-consuming. Getting a raise takes time. Side jobs take…well…time. It doesn’t take time to not do something — like not purchase a surfboard you’ll never use.

If you’ve never budgeted before, the idea of putting one together might be a little daunting. To get you started, use this “15-minute budget” template.

Next steps

We’ve covered why you need to take control of your personal finances (click here to read), we’ve covered how you’re going to do it. Now it’s time to take action and put the infrastructure in place.

Do you want to learn more about personal finance? But without the complicated jargon and dry explanations? Sign up here for Bits — our personal finance newsletter.