We hear about it all the time on the news, the economy is in a downturn, a slump, a recession, a depression. Job lost is at an all time high. People are losing their homes. People are scared. Just writing about it makes me feel scared. Oh no! What are we going to do?

Don’t worry. Relax and breathe. This is a good opportunity for you to re-evaluate and get your finances in order. Here’s what we’re going to do. I say we’re because I’m going to do it too.

First you need to know exactly what you have. Find out the balance in bank accounts. You really should know that. This might be obvious to most of you, but I haven’t checked the balance in my bank account for awhile. It’s just neglect on my part. My husband often asks me how much we have in the bank and sometimes I just make something up because I’m too busy to open up a new window on my computer and actually check it. I’d like to think that I have a good sense of what we have, but sometimes I’m a bit off. Being a bit off can put you in a bad situation.

Once you check what you have in the bank find out what you have in cash. Count all the money you have in your wallet and around your house. That includes change. Yesterday, I discovered that the stacks of coins we keep on our dining table add up to £32. When you think about it, that’s a lot of money to just leave in stacks on the table. If you have any checks that you haven’t deposited into your bank account yet, get on that. My husband is the king of what he refers to as the wallet check. He always has a stack of checks that needs to be put in the bank. He’s not good at actually getting them there.

Once you figure out what you have, you need to figure out what you owe. I want you to count everything–credit card debt, student loans, car loans, and the money you borrowed from Uncle Charlie last year that you said you’d pay back next week but now it’s been six months and you’re just hoping he’s forgotten about it. I even want you to include your mortgage. This is about being honest. You have to be honest with yourself and find out what your situation really is. That’s the only way you’ll be able to get out of the situation.

Now that you know how much you have and how much you owe, I want you to start keeping track of how much you spend. Get a small notebook that you can carry with you. If you’re all technologically advanced and have a Blackberry or an iPhone or some other gadget like that you can probably do this on that. I’m not sure because I’ve never had one of those.

Write down everything you spend. You’ll have to do this for the whole month of January. I know we’re already 9 days into the month but that’s okay. Write down every single item you buy and how much it costs. Don’t even buy a pack of gum without writing it down.

Many people complain about being broke, but don’t know where their money’s going. If you have a clear idea of what your spending everyday you can see what your expenses are. You can see what you’re wasting money on. How many bottles of water do you purchase in a day? Not that I want you to dehydrate. If you shriveled up and blew away, there’d be no one left to read this blog. I just want you to look for cheaper alternatives. Fill a bottle with water at home and bring it with you, for example.

This is just the first step, because before you can get your financial life in order you need to have clarity. My husband went through a stage of referring to having clarity all the time and it drove me crazy, but here I am saying it. You have to have financial clarity. You need to know what you have, what you owe, and what you spend.

So get that information together. I’ll put up another post next week to discuss what we’re going to do next.

Photo by Martin Kingsley

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