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Money is a very touchy subject for people. People don't like to go into specifics about it. They have a whole bunch of facts and figures thrown at them, they don't really know how it works so instead of asking questions, they just kind of wing it. This may or may not work. So today I just want to talk about some things and point out some resources.
First: Money is not evil. People who have money are not evil. True, not everyone "earned" theirs and they inherited but that doesn't make them bad people just because they have stupid amounts of cash. I do also understand that there are exceptions to this rule, but for the most part it is true.
Money is a necessity not a want in today's world. People use to just be able to trade some fur for some grain, or work a few hours for some food back in the barter days. Now, money is our barter system. I give you this and we exchange through dollar bills. It is how it works.
Second: Everything you do costs money and is affected in some way by money. It isn't just about brand names and high priced stuff, it's about everyday living. It costs money just to sit at home. There is gas, electric, rent, cable, internet, and water all needing to be paid each month if you're sitting at home or not.
Third: It affects your health in what you can eat and when you're able to go to the doctors. It not only affects things like affording insurance but having yearly physicals or just going to the doctors or emergency room when things get really bad. It is the difference between being able to get something checked out and taken care of with a simple antibiotic and doctors visit to ending up in an emergency room.
Fourth: For better or worse money is important and so is financial knowledge. It is something people need to know about and understand so they can keep more of it and use it for what they need and want.
In high school we probably had a class where we learned how to write a check and balance a check book. I'm pretty sure that was about it. No one talked about how it affects everything in your life, or about interests rates, credit scores, bank accounts, feeds, fines, CDs, IRAs, 401ks, and all of those type things. Unless your parents talked about it, which a lot of people don't talk about money, then there is a good chance people's knowledge come from either life fails or maybe a little bit of research.
So where do we start?
We'll start with the fact that I am not an expert in these matters. I have just read some books, talked to some investors, and learned a few thing along the way. Here are some of the key money issues I've learned.
1. Start saving and saving now. Most people wait until the end of the month to try and save. They'll wait until they have a few "extra dollars" to throw in an account. That extra money never happens. I know it and you know it too. Maybe during tax season, if you don't owe money, some money will be able to put in account and sit there for at least 30 days.
Stop thinking as savings as a maybe and make it a must. Make Savings a bill. So start taking it out now, automatically, and a small amount. You could do this by putting cash in to a old fashion piggy bank, or use the features for the on-line banking provides. When I say move money I'm not talking hundreds of dollars or even a hundred dollars a month, I'm talking small amounts like $10 per week. $10 normally wont cause an over draft or even much problem. Heck, going to Hardee's will cost you that much. Put it in, don't take it out and just let it grow.
If you can make sure the cell phone bill and water are paid each month why not some savings?
2. Let's talk about your income. When you go to work, you get paid X dollars per hour. Of that X dollars you will be taxed a certain percentage based on your total earnings. When I worked 3 part time jobs I was in the lowest tax bracket in each job because how much I made at that one job. However, when I added them all up for taxes, I was put in a higher tax bracket and actually owed money that year for taxes, which really sucked.
When dealing with your personal budget, everyone needs to deal with the NET amount they earn not the GROSS. Your Gross income is the X amount of money earned per hour. The net is the actual amount you get to take home after taxes and sometimes benefits(like 401k or health insurance). If you are paid $10 per hour you might actually only be taking something closer like $8.50 home, or your Net. You need to work with Net because that's actual money in your pocket or bank account.
I had a friend that was trying to pay her bills using the Gross amount she earned at a retail job. By the time she received her pay check two weeks later it was smaller and didn't cover what she was spending.
The Net amount is important not only for paying bills but when talking about salary or raises. If you need a total of $400 per week to survive, then you cannot ask for $10 per hour (40hoursX$10 = 400) because after taxes it will be closer to the $8.50 you get to spend. (40hoursX$8.50 = $340). So you'd actually need to ask for MORE then the $10, probably something closer to $12 an hour to reach your $400 per week goal.
3. The next thing that needs to be done is to sit down and actually write out what your ACTUAL bills are per month. It changes person to person, but here is a basic little list to start with:
Rent/House Payment
Car Insurance
Health Insurance
Phone Bill
Water Bill
Electric Bill
Credit Card Payments
Student Loans
Car Payment
Food
Gas
Play Money
Savings
By making Savings a part of your bills each month pretty much guarantees that you'll be contributing something to it each month.
Once you have your list and filled out with the actual numbers, add them up and see how much you need to survive per month. Sometimes that number is shocking because all the numbers are not normally in once place. What comes with that number is knowing what you need and what you can spend.
4. Credit score. This is important because it affects that jobs you can get, the houses you can live in and the stuff you can buy. The higher it is the lower interests rates or rates will be in general. In this About.com article talks about credit scores, why they are important and the big three companies that you need to check. (Experian, Equifax, and TransUnion)
Helpful Resources:
Two authors I recommend getting their books and reading them. They are both easy to read, use real world examples and you can find them in libraries.
Robert T. Kiyosaki author of Rich Dad Poor Dad
Suze Orman, who has a whole financial series
Ways to keep track of your monies:
For people how like applications they have a great free one called Mint that comes highly recommended. I haven't figure out if I like it or not. That might be another blog post, but until you can go to https://www.mint.com/ to find out more information.
I personally just use excel spread sheets, or because I'm a Google girl, their version. That way it is saved to the could and I can update my excel sheet anytime, any place with my smart phone. I have a list of my bills that don't change each month, then I have a list of the four things that change the most, gas, food(grocries and eating out), and other(presents, medical bills, taxes, clothes, whatever else life throws at you) and just keep track of what I make both at my day job and the restaurant.
Here is a link to a sample budget Google document. Feel free to copy it and make it your own. The formulas are all set up already.
For a great way to save through an on-line bank Capitalone360.com works well. You can have as many savings accounts as you want, it has no minimum or fees. Since it takes a few days to move between your accounts and it isn't some you check every day, the whole out of sight out of mind things happens. So when you do go and see what is going on you can be pleasantly surprised. Check out their website for more information.
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