Follow these steps to start managing your finances the right way today.

1.    Figure out your financial goals

To manage your finances effectively, you need to start by setting out clear financial goals you need to achieve- both short-term, medium-term, and long-term. Once you set out your goals, you can begin planning and strategizing on how you intend to achieve them.

Make your goals SMART; Specific, Measurable, Agreed upon (in case you want to involve your partner), Realistic, and Timed.

Once you have outlined your goals, prioritize them.  This will help you pay attention to specific goals that are of the highest importance to you. However, keep in mind that some long-term goals, such as saving for retirement may require you to work on them while working on other goals.

2.    Create a realistic budget

Creating a budget is also crucial to personal financial planning.  Stick to the de facto 50/20/30 rule for a start. With this budgeting rule, 50% of your monthly income should go towards your needs, such as groceries, health care, car payment, mortgage, insurance, and rent.

At least 20% of your income should be directed to your savings account. If you find it hard to do this manually, consider automating the process of transferring funds from your checking account into your savings account.

The remaining 30% of your earnings should be allocated to other nonessential items such as tech gadgets, new clothes, tickets to movies and so on.

3.    Pay off your debt and stay out of debt

Don’t be held back from developing a personal finance management strategy because you still owe a personal loan that you borrowed some time back. Talk to financial advisers and planners out there, and you will learn how most of them managed to pull out of massive debts.

However, the most important thing to do is to focus on avoiding debt. This means striving to pay off your current debts and restraining yourself from applying for new loans. To pay off your existing debts, start with the one with the highest interest.

Getting out of debt will bring peace of mind, and as you work towards achieving your other goals, you will have more money at your disposal.

4.    Build an emergency fund

Life is full of surprises and the unexpected expenses usually come up at the most inopportune time.  Therefore, it is always good to be prepared for different situations. Building an emergency fund is a critical part of a healthy personal finance plan.

An emergency fund will help you stay out of debt by covering things such as unforeseen home damages, car breakdowns job loss, or an urgent visit to the ER. A good rule of thumb is to stash away at least three months’ worth of your expenses as an emergency fund.