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Print Master Your Money - Painlessly
by Carey DenmanEvery day, we face decisions about money: how to earn and spend it, save and invest it. While countless books, videos and seminars offer a flood of advice, financial success is really about mastering three fundamental principles.
1. Live Within Your Means
As someone quipped, “Why do we spend money we don’t have, to buy things we don’t need, to impress people we don’t like?” Sound financial management starts with being realistic about what you can afford.
First, tally up the money coming in. List all your income and don’t forget sources like overtime, a part-time job, or an interest-bearing account.
Next, deduct your fixed expenses, such as rent or mortgage payments. Then look at how you spend what’s left over. Try keeping a diary of every penny you spend for a month. It will help you pinpoint exactly where your money goes.
Now, you’re ready to develop a personalized spending plan based on your values and goals. What do you value the most? Family time? Living debt-free? From these values, determine specific financial goals, like annual vacations or owning a house.
Once you’ve determined your goals, list specific steps for reaching each one. This spending plan will be a road map for planning major expenses and meeting financial goals.
2. Pay Yourself First
It’s almost certain you won’t meet your financial goals unless you learn to pay yourself first. So, save part of your paycheck before you spend any of it. There’s rarely money left at the end of the month if you wait. Then, check your spending diary and pick three small things you could do to save money. Saving loose change, packing a lunch or drinking homemade coffee instead of designer lattes, for instance. As you watch your savings grow and your goals coming within reach, you will feel excited and empowered.
3. Use Credit Wisely
Buying things on credit is, simply, spending tomorrow’s money today. Borrowing too much, buying on impulse or skipping the fine print usually lands you in trouble.
Credit isn’t extra money--you still have to pay. The later you do so, the more it costs. If you carry a balance from month to month, that $2,500 living room set could end up costing $7,500. So, pay off as much as you can as soon as possible. And don’t depend on credit to supplement your income or to buy something you can’t afford. And most importantly, read any credit agreement thoroughly and make sure you understand its terms before signing it.
Managing your personal finances doesn’t have to be painful. Ask yourself: What do I want? Where is my money going? Where can I save? The answers, coupled with a greater understanding of financial products and services, will lead you to financial success.
~ Carey Denman edited the book, Credit When Credit Is Due, by Paul Strassels. She is currently a graduate student at South Dakota State University.
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