How to get your finances in order: A 101 guide for families

Managing money means keeping tabs on many moving pieces, from bank accounts and bills to loans and credit cards. It's common to feel unorganized and wonder, "How to get my finances in order?"

Use this simple guide to organize your family finances piece by piece, whether for the first time or to get back on track. After completing these steps, you'll feel like a money master 🧠

Create a budget

A budget is a money management tool for tracking your monthly expenses and income. It can help you live within your means and stay on top of your financial accounts and money goals. Tracking every dollar makes it easier to discover budget areas where you can cut back and spending habits you may want to change. The grocery category is often a good place to find savings, from meal planning around your grocer’s weekly sales to finding ways to reduce food waste. Or perhaps your family won’t miss a streaming service or two. 

A budgeting strategy can help you balance bills, savings, and discretionary spending — including fun money😀 A popular budgeting method is the 50/30/20 rule. This means you use 50% of your income for needs like rent, groceries, and utilities. You allow 30% for wants, such as entertainment and vacations. Finally, you set aside 20% for savings and debt repayment.

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Manage debt

Managing debt is essential to controlling your financial situation and preventing overborrowing. It's also good for your credit score and puts you in a stronger position to meet financial goals. Minimizing high-interest debt, such as credit cards, can make it easier to get a mortgage, car loan, or other loan you may need.

If you have high-interest credit card debt — many people do — creating a payoff plan and prioritizing repayment over spending will help your budget and credit. If your debt happens to get away from you, don't be afraid to seek professional help.

Know how lenders assess your credit and debt

The more attractive your credit and debt situation is to lenders  — the financial institutions that lend money — the easier and cheaper it is to borrow. You want them to see you favorably if you ever decide to qualify for a loan or some type of credit. Lenders typically consider the following credit qualities before approving or denying a loan applicant:

• Credit scores: Lenders use your credit score to gauge your creditworthiness. Maintaining a high credit score can improve your chances of loan approvals and the lowest interest rates, saving you money whenever you borrow.

• Credit reports: Your credit report shows lenders your history with debt, acting like a financial report card. A history of on-time payments on different types of debt shows lenders you take your debt responsibilities seriously. You can get free copies of your credit report from the three major credit bureaus at AnnualCreditReport.com.

• Debt-to-income ratio: Lenders also look at how much of your monthly income goes toward debt payments. They use this ratio to determine whether you can handle more debt. By lowering this ratio — perhaps by paying off a credit card or other debts — you can present yourself more favorably when applying for loans.

Protect yourself with insurance

Life can be unpredictable, so you want to protect your family and finances with the right insurance. Insurance may feel like a burdensome monthly expense, but it's better to have it and not need it than to need it and not have it. An accident, illness, or natural disaster could result in considerable financial damage without it.

It's a good idea to evaluate your insurance needs periodically. Consider whether your current policies still provide the right amount of coverage and if you have any financial vulnerabilities insurance can protect. 

If you're unfamiliar with how your policies work, reach out to your insurance agent. The more you know about your coverage, the fewer surprises you'll encounter if you need to file a claim.

Set financial goals

Financial goals — whether saving for your kids' college, a house down payment, or a vacation — give you direction and help you make spending choices that support your goals and monetary well-being.

Money goals should include a specific dollar amount and completion date so you can track your progress. Monitoring your progress and seeing your success can help you feel more in control of your financial future.

Kids can also benefit from understanding how to get finances in order, including setting money goals. Greenlight®, the money and safety app for families, is a valuable tool for kids to discover the satisfaction of tracking progress toward a savings goal and succeeding🎉

Build an emergency fund

Think of an emergency fund as a buffer between your budget and life's unexpected expenses. If your car needs repairs or you face an unplanned medical bill, you hopefully won’t need to use credit cards to manage those costs.

It's best to have an emergency fund worth three to six months of essential expenses — the ones you must pay. If your income gets cut or you lose your job, you can rely on your emergency fund to pay bills until your income recovers.

Plan for retirement

Daily bills may feel like your biggest concern right now, but it's wise to start thinking about retirement sooner rather than later. Taking small steps today, like contributing to your employer's retirement plan or opening an IRA, can make a big difference in how much you'll have to see you through retirement.

Thanks to compound interest — when your earned interest is earning interest — saving small amounts over a long period can mean a more significant nest egg than waiting until closer to retirement to start socking away money.

Considerations to get your finances in order

Now that you know how to get your finances in order — or get them back in order — you can begin taking the steps. You don't need to tackle everything at once. If you don't yet have a budget, it's a great place to start. You'll find it extremely helpful as you focus on other money management tasks, such as managing debt and building an emergency fund.

Parents, someday, your kids will take these same financial steps. Why not make it easier for them? Download Greenlight Infinity today and have the peace of mind that you're starting them on the road to building good financial habits. If you have teens out on the actual road, the app's location sharing, safe driving reports, and other safety features can ease your mind, too🚗