There's a reason so many Americans are short on savings and drowning in debt: They have no idea how to manage their money. If your finances are deep in disarray, it's time to get a handle on them sooner rather than later. This means understanding how you're spending money, establishing an emergency fund, and determining what financial goals you want to focus on. Here, we'll review a few key steps for getting on top of your finances.

Step 1: Create a budget

It's estimated that almost 60% of Americans fail to follow a budget, even though a budget is probably the single most effective money management tool out there. If you've yet to create a budget, the first thing you need to do is set one up immediately. To do so, simply list your recurring monthly expenses, factor in once-a-year expenses, and compare those numbers to your take-home pay. Ideally, you should come to find that you're able to save at least 10% of each paycheck while keeping up with your regular bills. If that's not the case, then you'll need to start making changes to free up more room for savings.

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Step 2: Build an emergency fund

You never know when you might fall ill, lose your job, or get hit with an unplanned expense that your standard paycheck just can't cover. That's why it's crucial to amass some emergency savings, and by that, we're talking a minimum of three months' worth of living expenses, and ideally more like six months' worth. Having emergency savings not only gives you some financial wiggle room, but can also help you avoid debt. And the less money you throw out on interest charges, the more you'll have available to help you meet other goals.

Step 3: Establish a nest egg

It's estimated that one in three Americans has no retirement savings to show for. Another key step on the road to proper money management is setting an adequate amount of cash aside for the future. At a minimum, you should be saving 10% of each paycheck for retirement, but if you're able to ramp up to 15% to 20%, even better. (Remember, we don't know what retirement costs will look like in the future, but what we do know is that historically, they've been proven to climb.)

If you work for a company that sponsors a 401(k), your best and easiest bet is to contribute a portion of your income each pay period. If that's not the case, then you'll need to set up an IRA, which you can do at your local bank or financial institution. Keep in mind that both account types are subject to annual contribution limits. If you're under 50, you can put up to $5,500 into an IRA and $18,000 into a 401(k), though the latter threshold will increase by $500 in 2018. If you're 50 or older, you get a catch-up provision that raises these limits to $24,000 ($24,500 in 2018) and $6,500, respectively.