While you were growing up, you were taught basic Math skills. The lucky few might have taken a basic Accounting Course or two and might have even had a few extra courses that dabbled in taking care of yourself while living on your own. Many people make it to adulthood with no idea how to manage their finances beyond making sure their rent is paid every month and some are not even capable of that. If you are one of these people who want to start being financially responsible and make some positive changes or you know someone who could benefit from this lesson, stick with me and we will just dive right in.
LAST MONTHS FINANCIAL HABITS – FIGURE IT OUT
Your financial habits have a very big impact on your life and your ability to live comfortably with a feeling of security. In order to start managing your personal finances you have to have exact figures and be brutally honest with yourself on paper. It might help to start with the previous month – get together all of your bills and receipts you may have kept and take a look at them, is there anything missing? If so, write down where you were and how much you spent (estimate if necessary). Make sure to check your bank statement for anything else and have that with the rest of the paperwork.
So, let’s start by writing down how much you earn every month with the dates you normally get paid. Write down if it is daily, weekly, bi-weekly or monthly and show how much comes in and when. Now, once you have figured out your “income” put that at the top of the page and list it as INCOME – and subtract everything else from that amount and as you subtract, find the corresponding bill or receipt that was paid and set it in a new pile. Start with your rent or mortgage, utilities; gas, electricity, water, trash.
Now subtract other necessities like condo fees, renter insurance, house insurance, health insurance, car insurance, life insurance and credit card bills. Now subtract phone, cable, internet, cellphone, gas for your car or public transportation fees. Now subtract all grocery receipts – this includes food and everything you use on a day to day basis to take care of you and your things, like laundry soap and shampoo. If there are any other receipts to be subtracted figure out what they are and write them down.
If they are receipts from being at the bar on a weekend or going out to eat or a newly purchased DVD player – list it as what it is. An example of this is eating out (whatever it was), going to a movie – any bar or anywhere else would all be under the category of ENTERTAINMENT.
Anything else can be listed as MISCELLANEOUS or whatever you decide to name it. Is there any money left over? If there is not, if you are indebted to someone for a cash loan or if you were using your credit card to buy things or get cash, there is a big problem. If there was cash left over that was carried into the month you are in now, fantastic!
WHERE TO SAVE MONEY
Ideally, there is always enough money left over at the end of the month to get by. For many people there is not. Many people are living hand to mouth or paycheck to paycheck, praying that no emergencies crop up that will drag them under. It does not matter what you do for a living, if you are giving out more than you bring in, this has to be stopped. One way of putting a stop to this pattern is; figuring out where you can save money and in order to do this, you will need to look over what you have done already and make a budget to cover just your necessities, not your wants. In a perfect world, we would all learn this while we are young, before it is ever needed.
There are many free budgeting tools online as well as programs that one can purchase. I have made a simple printable budget template that you will find under the Budgeting tab on the main menu of this website, where you will also find helpful articles.
Once you have identified areas where your spending can be cut back, it is up to you to make sure that you control your spending in those areas of your life where you seem to have less control over your spending habits. I myself quit going to the local pub to save myself money and it worked. Once I got that area of my life under control, if I decided to go out for a few drinks, I made sure it was just that, by taking only a small amount of money with me. When the money was gone, so was I.
Now that you know where all of your money is going you can best decide how to tackle what debt you have. Some people get a second job or even a third job and earmark all of the income from these jobs to be set aside for paying off debts. Whether it is from credit cards, store credits for furnishings or electronics, medical or dental bills, they can all be looked at in a different way.
These are all things that will help to build your credit score once they are paid off. Find the one with the highest interest rate and start making extra payments with any extra income you have from your extra jobs. Once that is done, move onto the next one and keep doing it until you get those things back under control.
If you do not want to spend a long period of time working to pay off debts with more than one job, your alternatives would be to get a better paying job, have a hobby that makes you money or filing for Bankruptcy to get some financial relief. There are cases where it will take a Bankruptcy to get someone back on their financial feet.
Certainly for everyone, financial management is a way to make sure you either get out of debt, stay away from being in debt and save money by, learning the art of frugal living. There are many tools out there to help us do this right, an expense calculator could prove very useful, as well as, many money management apps that you can download to your cellphone that, will help you to keep on track when you are away from your home. These should be looked at carefully and tested out to see, what is most helpful for each person individually as, we all have different likes, needs and wants in such tools.
Remember, money management is a skill that can be learned by anyone and should be put into practice as soon as possible. The sooner you start financial management, the sooner you will find yourself out of debt and able to save for your future. Real, impactful, financial management will enable you to build up your nest egg and let that money, make money for you. I hope this article has helped you, please take a look around this website for more helpful articles and “save money tips” and tricks.