Money management skills are not taught in many high schools or universities, and many people get a failing grade in financial literacy. The problem is many people make it more complicated than it is. You can get your finances in line and maybe even save some money (or your credit!) in five easy steps.
Create a Budget
Don’t worry about spreadsheets, mobile apps or software for money management. Some people think it is complicated or too hard. It doesn’t matter if you keep it on a napkin in your junk drawer in the kitchen. Sit down and figure out how much money you make and how much you are spending each month.
Hopefully, you are bringing in more money than you are spending. Make sure you add these important categories: Housing, utilities, groceries, savings, gas, credit card bills, medical bills, and other payments. You can also add dining, entertainment, clothing and a catch-all category called miscellaneous. Personalize the budget so that it works for you.
Write it Down!
You have a budget, but it’s worthless if you are not keeping track of what you spend. Write down all of the expenses you have from each category. You may discover that you are spending too much in one area and you need to make adjustments. For example, many people don’t realize how much money they spend eating out until they collect receipts for a period of time. Again, you don’t have to complicate it. Just make sure you are tracking your expenses and keeping the record safe somewhere.
Organize your Bills Offline and Online
Do you sometimes leave bills unopened because you are afraid of what you will see? Leaving them in a pile by your front door is not going to make them go away. Set aside a place where you put the bills that come in the mail. Organize them by category so you can get a clearer picture of what you owe and the due dates.
You can also organize your bills online. You may already be paying some of your bills online or using automated payment systems. Side note here – automated payment systems are great for money management. Take the receipts you are sent and store them in your email folder labeled “bills.’ You may want to go further and separate it into different types of bills. While you are online, you may want to consider using a spreadsheet to track everything. You don’t need any software. You can use Google sheets for free.
Many people think they cannot save any money because they earn too little. But savings should be just as important as paying the bills and should be a part of your budget. How can you save on a limited budget? Look at your expenses? Cut out dining every week and trim it down to just once a month. Use coupons to save at the grocery store. Watch movies at home instead of going to the theater. You can find the money to invest in savings if you look.
Use Credit Wisely
Christmas, birthdays, vacations – many of these events end up on a credit card because you have not saved for them. Sometimes you need to use credit for a rainy day for expenses such as car repairs, unforeseen medical expenses, and home repairs. Credit can be beneficial if you use it wisely.
• Make sure you know the interest rate and annual fees on the credit cards and loans you get. You may get excited about a high credit limit but how much will you pay back after interest fees accrue? Consider how much you will pay back and look for cards with lower interest rates.
• Pay as much as you can each month on your credit cards. Ideally, you would be able to pay off the balance each month and possibly avoid an interest charge. In many cases, paying the minimum only covers the interest and none of the principal.
• Don’t miss payments. Even if you don’t make any new charges, the interest on previous charges is still accruing on your credit cards, and you need to make a payment. You will also find yourself on the other end of an unwelcome phone call if you miss your payment. Banks and loan companies will also turn you over to a collections agency if you miss too many payments. You want to avoid these phone calls and avoid a black mark on your credit. Do all you can to stay out of collections.
• Ask for help if you get overwhelmed. You may not have family or friends who can loan you the money to help you. But you can find reputable debt relief companies that will deal with your creditors and restore or help you keep your credit in good standing. Don’t wait until it’s too late to ask for help. The longer you wait, the more your credit rating declines.
Paul J Paquin is the CEO at Golden Financial Services and the author of the book called; “A Complete Debt Consolidation Guide to Become Debt-free.” Paul spent the last 15-years engulfed in debt consolidation, as the CEO at Golden Financial Services, learning about the most effective debt relief options by researching and testing different methods.