Think about how often you save your hard earned money. We all know we should save frequently but how many of us are doing so effectively so that we’re actually able to reap the benefits? By monitoring both your saving and spending habits you’ll be able to put yourself in a better financial position. The sooner you get started the better; it’s never too late to start managing your money the right way.
Putting Your Financial Position into Perspective
After taking a personal financial planning course while in college it changed my perspective on money completely. I learned the popular saying “A little goes a long way” is so true especially when it comes to money management. While in this course our very first assignment was to calculate our net worth and then keep track of every penny we spent for an entire month and document what it went towards. Just as a refresher in simple terms: Net worth = What You Have – What You Owe.
As a college student with a lot of student loan debt and not much in assets, it was no surprise to me that my net worth was going to be in the negatives. I knew that I was in debt but I never took the time to actually calculate how much until this assignment. Doing this definitely put my financial position into perspective and motivated me to create better spending habits.
How A Little Goes a Long Way
My father keeps a huge 5 gallon water jug in his bedroom just to toss his spare change in (it’s pretty much his piggy bank). Even if it’s only a penny he makes sure to put it in the water jug until it gets full. This year to his surprise he had over a thousand dollars just in change. He was able to accumulate this only over the course of a year! You’d be surprise how much spare change can add up over time. Just like saving you’d be surprised how much money you spend over the course of a year as well.
For my financial planning assignment I downloaded an app that allowed me to break down my spending into categories. With not much responsibility in college; the categories that I created for myself consisted of: Food & Drinks, Clothing, Entertainment, Bills, Toiletries, and Events. At the end of the assignment I realized I was spending a significant amount of money just on food. I was shocked on how much I was spending which prompted me to make some changes in my life.
Ways to Better Manage Your Money
I am a huge fan of Mint. Mint is a personal financial management company that provides services to help you manage your money better. I wish I had known about Mint in college because this app categorizes your spending habits automatically if you choose to link it to your bank account. It’s great for tracking your bank account balances & transactions and it can do the same for credit cards, investments and loans. Using this app will help you budget your money better because you’ll be able to see your cash flow, upcoming bills and an overall financial picture based on the information you provide. You can download the Mint app on your mobile device or check out their website at: https://www.mint.com/
Save at least 20% of what you earn.
Each paycheck you receive you should try to at least put 20% into your savings. Many of us have bills and other responsibilities so if you’re not able to save at least 20% try at least fifteen or ten percent. I began challenging myself to put at least 25% of each paycheck into my savings and now I’ve bumped that up to 30%. If your bank offers a tiered-rate account this will be a bonus because the higher your account balance is the higher the interest rate payment will be.
This goes back to what I was stating earlier spending goes a long way as well. For example if you work 5 days a week and you buy lunch everyday for $8.00 you’re spending $40.00 a week. If you do this for an entire year you’re spending $2,080.00 just on lunch. It’s okay to treat yourself occasionally but when you treat yourself often that adds up. A good way to save money using the example just given would be to pack your lunch instead. For example you could purchase lunch meat that would last you for the entire week which would be less than the $40.00 you’re spending. Treating yourself occasionally doesn’t just go for food this goes for clothing, products and other goods and services as well. I can honestly say I’m guilty for having expensive taste, but if you’re trying to save delaying gratification will be very rewarding in the long run.
By understanding your financial position, tracking your cash flow, creating a budget, saving a percentage of each paycheck, and delaying gratification you’ll already be ahead of most people. Doing these basic things will allow you to have some extra funds in your account. There is a bit more when it comes to money management such as investments and growing the money you already have which I didn’t touch upon in this post nevertheless implementing these tips I’ve outlined here will help jump start you in the right direction towards successful money management.
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