I didn’t get my degree in accounting, or finance, or even business. I studied science and foreign languages. What gives me the credentials to write a blog on finance? I choose Experience for 100 Alex.
In my years as an adult I have had credit cards, student loans, a mortgage, been in collections, decreased our household income by over 50% and I have done it all with a pretty good credit score. What, you didn’ think you could end up with something in collections and still have a credit score right around 700? Well, its possible of you have a plan and play your cards right.
I like many young people, dove right into the deep end when I got to the magical age of fiscal responsibility: the freshman year of college. I got a couple of credit cards, I bought some things that were useful, but could have been postponed, and I made some less that stellar decisions. While things might have been easier if I hadn’t done some of these things, I am glad I at least learned from them.
Card #1: Income
How much do you make? For some people this is a really simple question. They have a set salary, they get the same amount every month, and that’s the end of that. Others have a more flexible income whether they are paid hourly and sometimes do overtime or have had their hours decreased, or a large part of their income is tips, or they get child support or other financial support from outside sources. Add it all up, and know how much money you really have.
When you look at your finances and your life, you need to know what you have, and what you will need to get to where you are going.
Card #2: Fixed Spending
As much as I may dislike my electric bill, its really not something I can live without. If you can, great, but I have a young child and honestly I like refrigerators, washing machines, and heat. When you are thinking about your future, you have to consider things that will always be there. Even if you don’t have credit card debt or a mortgage you will still have utility bills, taxes, and health care. (I think health care is really important, and until a whole lot of things change, you need to take control of your health and health care.)
Card #3: Variables
The variables are the things that have price fluctuations and its where many people stumble. Sure food is necessary to live, but do you need a fillet Mignon when a burger will do? There are also the things that you know aren’t necessary, but you really enjoy. If you know that you don’t function properly without your morning cup of coffee or diet cola, then by all means make sure you have it. Just make sure you know what its costing you.
Card #4: Infrequent Purchases
These are the things many people forget about when they look at thier money. Sure you are paying your car insurace, but what about renewing your car tags. They only happen once a year (or less often in some states), and easy to overlook when planning money funds.
Card #4: Your Future
I know you should pay yourself first, but for some people they are too busy slipping to find foothold. Sadly, we have been told that if you are laid off, expect it to take 6 months to find a job. What would you do if suddenly you were in that position, do you have enough liquid assets to make it, or would you be using credit lines to pay for everything. There are sample and example budgets available all over the web, so why don’t we use them?
I am a huge fan of MS Excel so, I do all my budgeting in Excel. But there are many money programs that are more ‘user friendly.’ There is Quicken, Microsoft Money, a newer program called Mint, and even for the strange people that made way too many graphs in college there is Excel.
I look forward to introducing a very basic budget, and the benefits of having one in future posts.
Thanks for reading!
The Finance Fiend