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It’s important to think of money in terms of a relationship, are you in a love/hate relationship or happily married? Getting your personal finances under control is key to making your life flow smoothly. Find out how simple steps will allow you to take back control of your finances.
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1 – Examine Your Relationship With Money
My early experience with money was more of a speed dating relationship. Money passed through my hands so fast, I didn’t have enough time to builda friendship much less a relationship. Personal finance was not high on my list of things to worry about.
After I bought my first house and money started getting tight, I started educating myself about finances.
I went on to learn that most people’smindsets aboutmoney center around scarcity. They livewith the idea that they don’t have enoughand they live in a constant state of lacking. They think that there’s never enough and will never be enough. And so, it becomes true.
Some of us may have seen our parents struggle. We may have seen them fight over money. We’ve all heard the phrase “money is the root of all evil”. There’s also an old saying that money can’t buy happiness! True,it can’t … if you’re unhappy with your present income you’ll be unhappy when you have more.
The scarcitymindset needs to change to one ofabundance. There are unlimited resources in the world. The universe provides the abundance we seek but we just can’t sit back and ask for it … there is some work involved. Start moving your mindset from “there isn’t enough” to “there is enough”. Open yourself to receiving. You deservefinancialcomfort. You deserve to be comfortable. Money can do generous and wonderful things in the world.
Further reading: The Abundance Experiment
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2 – Pay Yourself First
It doesn’t matter how big or little your salary is, put aside something for yourself first. Payroll deduct it if you have to so you won’t be tempted to spend it. Even a small amount builds up over time. Just $5 or $10 a week will get you on your way. Evaluate where your money goes using a very simple budget. Track each month’s income and outgo and see what you can squeeze a few dollars out.
If you’re still having difficulty saving try a work at home job like filling out surveys, doing crowd tasking jobs, or find something you can sell to make extra cash.
As a rule of thumb, you should have three to six months’ salary in savings for emergencies. This one’s difficult, I know, I think I’ve only had that much stashed in savings (that I could freely touch) a fewtimes in my life.
3 – Invest in Your Company’s 401K program
Start a 401K savings account either through your company if they offer one or if they don’t, through your bank. Most banks have 401K programs that will take before tax deductions from your paycheck. 401K’s are a big help to fund your future financial security.
I’m going to let you in on a little secret that it took me almost 20 working years to figure out. The amount taken from your check pre-tax to fund a 401K makes your taxable income smaller. This, in turn, means that the government will take out fewer taxes. In essence, your take-home pay will stay pretty much the same. That break-even percentage varies on your pay and tax rates. Also, most employers match up to a certain percentage of whatyou invest. If they match up to 3% and you have 3% taken out of your paycheck pre-tax, your money has just doubled without much effort. Hey! Free Money!
4 – Keep Your Hands Off Your Savings
Emergencies come up, there are vacations that are impossible to turn down, and sometimes you just have to have a little fun. But the last time I looked a pair of Jimmy Chooshoes is notan emergency.
Once you have a 401K started and have funds going into it, avoid the temptation to take out a loan against your 401K! If you get laid off, and in today’s employment climate that’s entirely possible, your 401K loan to buy that great car may come due in a lump sum. It’s just not worth the risk.
According to a 2017 retirement savings survey, less than 33% of adults in the U.S. have anything saved for retirement. Over half don’t have more than $10,000 in savings.
No matter what age you are, it’s never too late to start setting aside money to secure a long-term financial future. GoBankingRates has a great article on long-term savings options. You can find it here: 5 Proven Ways to Save For Retirement
5 – Use Credit Cards With Care
Yes, one of the best ways to start or build up a credit rating is having credit cards. Your credit ratings show how diligent and trustworthy you are in paying your bills and your credit debt.
Having a gas card and a major credit card will build up your rating. The higher your credit rating, the easier it is to qualify and get better interest rates on loans.
Here are some basic guidelines:
- Find a card that gives points on your purchases that you can apply to whatever interests you. Beware of running up a balance chasing points though, collect them over time.
- Shop around and find the lowest interest rate possible.
- If you already have a card and find a better one with a one-time rollover with a lower interest rate, go for it. Close the old card after the transfer is complete.
- Keep your cards paid off in full. Accumulating interest on purchases is like paying for them twice.
- If you keep your balances paid off or low, try renegotiating your interest rate with the card issuer.
- Don’t fall into the minimum payment trap, always pay at least double of what that number is. Minimum monthly payments benefitthe card issuer, not you.
- Consider using the card for convenience and only buy things that you have money in the bank to cover.
A credit card isa useful tool. Like all tools, aninjury could occurif you don’t learn to use it correctly.
Going Beyond the Basics
Financial Classes
Community colleges are a great resource to find basic financial classes. Most major colleges also run adult education classes that are very useful but they’re a little more expensive than the community colleges.
Be wary of financial classesrun by financial institutions or insurance companies. They have limited useful information, there’s usually a sales pitch to use their services or buy their products at the end.
Also be wary of where and what information you find on the internet. Only deal with reputable sources and if it sounds too good to be true, it is.
Books
I’ve found three books that really stuck with me and have become my favorites each for different reasons.
Making the Most of Your Money by Jane Bryan Quinn. It’s the book that started me on my road to financial health. I really like Jane’s writing style and she makes complex subjects fairly easy to understand. This is my go-to reference when I need a refresher. The book is tattered and dog-eared and much-loved. There is an updated version (which is on my wishlist) calledMaking the Most of Your Money Now, it reflects the changes in the current economy.
My next favorite is not so much a how-to financial book but rather one that has valuable information about howour attitudes about money affect how we save and spend. Rich Dad, Poor Dadby T.Kiyosaki made me think about how my attitudes toward money were affecting the way I was saving and investing.
The third book camerecommended to me by my financial adviser. Smart Women Finish Richby David Bach. It has excellent forms in the appendix to use for financial goals and to get an idea of where your money goes and to help you in determining where you really want it to go. The book also addresses how some of our attitudes about money that hold us back from success.
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Good Luck
Saving money takes time and patience, but before you know it, you’ll have a nice nest egg saved up and the peace of mind that goes with it.
I’m by no means an expert on money matters but I’ve learned what works well for me. There have been a few potholes along the way but I’ve learned a lot while I was hoisting myself out of them.
If you have any simple tips that have helped you, please leave them in the comments!
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