By Cassandre Cassamajor

At various points in life, it’s important to set or reset your financial goals. If you’re starting your career, or you’re overwhelmed with debt and wondering how you’ll pay your bills, you may think your goal is just to survive, but that won’t help you improve your situation. The truth is, whatever your goal — to get out of debt, improve your credit, build savings — you need a plan to get there.

First, give yourself grace for past mistakes.

The first step towards financial literacy, or financial wellness, is to give yourself grace. Whatever situation you are facing, you are not alone. Frustration with being a financial novice is a common feeling. It’s normal, too, to feel overwhelmed by your debts. Berating yourself (or your partner) for creating your situation does not help anyone. Instead, choose to improve your financial position, here and now.

Understand your financial situation.

When it comes to finances, ignorance is not bliss. Being financially literate means taking the time and effort to know where you stand right now and how you can progress along your financial journey towards your goals.

Getting control of your finances begins with knowing your starting point. One, get a copy of your credit report so you know where you stand at this point. Two, create a budget so you can truly analyze your income and expenses. You may think you already know what’s coming in and what’s going out, but seeing it in black and white makes it real and undeniable. Many tools and resources are available to help you create a budget and manage your finances.

Check out your financial institution’s website for a financial wellness page, budgeting tools and ways to build or repair your credit, or ask a representative to help you. If you’re not getting the help you need, shop around for a better fit.

A Community Development Financial Institution (CDFI) is designed to work with members of their surrounding community — who are often minority or low/moderate income individuals — to help them achieve financial wellness. They may hold free seminars you can attend to learn about financial literacy, too.

Determine where you can trim expenses.

If your budget shows you’re spending more per month than your income, you need to either earn more or cut expenses. Most people cannot easily increase their incomes, so look for where you could reduce expenses.

Of course, you need food, but maybe you can cut back on the snacks and treats you buy. It’s important to relax and have fun, but could you invite friends over for a movie night and popcorn?

Consider carefully before making purchases you want but don’t need. Say you found a pair of shoes you love. Is the enjoyment you’ll get from them worth having to cut something else from your budget? Maybe the answer is yes, it’s worth it. But by carefully considering every purchase, you’ll find you can forgo many extras by keeping your goals in mind.

Create a plan to take control.

Once you analyze your budget and cut expenses, the next step is to allocate towards paying off debts. If you feel overwhelmed with debt, look into available options for help.

Your financial institution may have advisors who can help you plan or ask them to refer you to reputable debt counselors. Also, your financial institution may have a debt consolidation option where you can combine your owed balances into one payment through a loan with a competitive interest rate. Another option is debt management companies that work with your creditors to accept reduced payments. You submit one payment each month to the company and they distribute it among your creditors.

Be sure to read every clause in any contract before signing it. Question anything you don’t understand. And if something doesn’t feel right, listen to your gut instincts and go somewhere else.

Commit to saving with the 50-30-20 guideline.

Even in a tight budget, it’s important to build savings, both for the future and for unexpected needs like a loss of income or major car repairs. The 50-30-20 formula means to try to allocate 50% of your income to needs like housing, food and utilities; 30% to your wants such as entertainment and hobbies; and 20% to savings.

If you can’t commit 20% to savings now, start with 5% or 10% and build up to 20%. The important thing is to establish the habit. Set up an automatic deposit to go directly to savings as if it is a bill.

A favorite tip of mine is to have different savings accounts for individual goals, such as one for vacation, another for retirement and a third for something big like a down payment on a house. Another tip is to put your savings where it isn’t easily accessible — like a Certificate of Deposit — so you can’t dip into them on a whim.

Hold yourself and others accountable.

Review your budget and plans monthly to see how well you’re following them. If you’ve fallen short by overspending, vow to stick to the plan next month and hold yourself to it. Remind yourself of your end goals so you can see the light at the end of the tunnel. Check up on those helping you, too, like making sure your debt management payments are going to your creditors on a timely basis. Use trusted resources to regularly check your account transactions and your credit report to ensure all information is reported accurately. If you see any discrepancies, ensure you get clarification with your financial institution and creditor to come to a resolution.

Own your journey.

Resist comparing your financial situation to anyone else’s or listening to negative comments. You are on your journey. You have invested a lot of effort in improving your financial literacy. As you see your bills being paid down and savings going up, be proud of your accomplishments, knowing your future will be brighter because of the decisions you made.

Cassandre Cassamajor is a Community Development Representative at SkyPoint Federal Credit Union and has 10 years of experience in the financial services industry working with commercial banking institutions as a personal banker and service manager.