Of course, there’s no way to cover such a broad topic at once, so I imagine this one will be spaced out over many posts and over much time. But seeing as we’re in some pretty sketchy economic times, with people struggling to get by, it seems an appropriate topic. So, today, let’s talk about (very) basic money management.
“A penny saved is a penny earned,” says the wisdom of old. And it’s true, no doubt. But it, like most things in life, is a far cry more difficult done than said. But there are a number of things we can do to make it easier to get by, even prosper. I’ll outline a few of those today.
First and foremost, you HAVE to gain an understanding of your own financial situation. How much do you make a month? How much do you spend? Is the that first number smaller than the second? If so, you’ve got a problem. But don’t worry. You aren’t alone. And while I know that seems elementary, my time spent working as a bank teller taught me that there are a vast number of people who fail to understand this. There are a few useful tools to do this. Mint is an excellent tool, which lets you add all of your various bank accounts, credit cards, loans, investments, etc. If anyone else knows of another tool that works as well as Mint, please let me know. If you’re not too keen on giving all your bank account login info to a third party, I understand. I’m not either, but I did it anyway, and I have not had any problems so far.
So. Look at your income. (If you’re an hourly employee who doesn’t always work quite the same number of hours, average your hours/week for the last few months and go from there). Look at your expenses. Subtract the two, and that’s how much available or liquid money you have. If you don’t like the look of that number, don’t worry. You aren’t alone. It’s an easy place to be these days. We’ve entered a subscription hungry era in technology. Netflix, Hulu, Spotify, Web Hosing, Internet, Cell Phones with Data plans. There’s a lot of little expenses that can really add up. Plus, gas and food costs are constantly going up, so it’s a hard game of which to stay ahead. And if you’re discovering you don’t have quite the liquid income you’d like, you’ll have to cut back a little bit.
So. Look at what is NECESSARY. Rent/Mortgage, Car Payment, Electric, Water, Food, Gas: these will keep you alive and with a job. What’s pretty important for your professional life / livelihood? Cell phone (Or some phone), internet,
Now, what’s completely unnecessary that you’d like to keep? Data plans? Hulu? Netflix? Cheese of the Month Club? What of these things can you live without? Consider this when looking at what you might cut: if you make $10/hr at your job, those Hulu and Netflix subscriptions will cost you at least 2 hours of your life a month. Have discs with netflix? You’re looking at 3 or 4 hours of your life a month. Is it worth that much to you? How about that Cheese of the month club? You’re donating 3 hours a month to new and exciting cheeses. It makes it easier to decide what to live without.
Now, here’s another thought: What if your car breaks down? You get a ticket? Did you include that up there in your list of necessary expenses? Probably not, and you’re not alone with that either. So you’ll need to make sure that you have enough “free” money left over to save up a little for those unfortunate surprise expenses.
If you don’t have one already, I suggest you go talk to your bank or credit union about a savings account. Find out what the requirements are, and figure out how quickly you can meet them to avoid having any fees. Then, every time you get paid, take some small amount from your paycheck and put it in the savings account. $5, $10, $500. Whatever you can afford. It may seem insignificant, and that’s good. You want it to be. It needs to be money you won’t notice as missing. If you do too much, you risk having to pull from savings, and if you get in that habit, you’ll never save anything. So, make it something you know you can handle, and as you adjust to the change, you’ll find you can keep doing more. That way, when you do have an emergency situation, you don’t jump for the credit cards or worry where it’s going to come from.
Now. I realize this is not always possible. Sometimes, those necessary expenses are bigger than your income without anything left over for the kind of necessary ones and certainly none for the unnecessary ones. In such instances, I’m afraid I may not be much help. Your options are slim, but you have to look for ways to reduce the expenses to fall more inline with your income. Is there somewhere with cheaper rent? Do you have a car payment you can reduce by trading in/down? Can you get enough internet in your area for free without having a subscription at home? I’m open to lots of input here.
This post hasn’t even scratched the surface, but it’s give us a good starting point. The biggest thing to remember is so simple its ridiculous to say, but its implications are far reaching, and it’s often very difficult to put into practice. SPEND LESS THAN YOU MAKE. That’s it.
Am I full of it? Let me know. Got a strategy that works for you? Let all of us know. Worried that I didn’t cover a topic? Let me know, I’ll get to it some time. Let’s talk. What’s troubling you about your financial situation?