I was reading my Costco magazine which, for the month of April, had a focus on money. In the editor’s column, he quoted Valentino Sabuco, executive director of The Financial Awareness Foundation. Sabuco said “People are not taught smart personal financial management at home or in shoo, thus they do not have the proper tools to address everyday financial decisions in an informed manner.” Amen.
So, let’s talk about simple steps you must address and employ to manage your money.
–first, spend less than you make with each paycheck.
How do I do that, you ask? First, know what you actually make in your paycheck. This will probably take more effort than it used to. Once upon a time, your boss gave you an actual check….today, it’s probably all behind the scenes for most workers. Thus, you need to actually go find your paystub, probably on your company website. Print it out. Look at it. Regardless of whether yours is virtual or maybe an actual check, look it over. Make sure what they are taking out matches what you signed up for.
Second, you must bring your expenses into line with your pay. Now, you can go the other way so that if your expenses are higher than your paycheck by getting a second job. So, feel free…but whether you have one job or five, your expenses must be less than you spend. To figure this out, then you must keep a record of what you spend. Every dollar. Every penny. You spend money in one of two major ways….fixed expenses such as your rent or cable bill, and flexible expenses which is everything else that fluctuates.
Now this gets us to budgeting which I will leave for some other time, but on the whole, the point is that you cannot spend more than you make. To protect yourself here, you have to know where the money goes. Then, you have to be determined.
–second, realize how credit works.
The general system is not one to help you with your purchases, no matter what the ads tell you on TV. Credit is a business and it is designed to make that company money. The way that happens, generally, is by you being a sucker and spending more money than you actually make and then paying the credit company interest. They WANT you to NOT pay it off. They WANT you to pay only some, a little bit, each money. They want you to take as long as possible to pay it off because as you take time, the interest keeps adding. For one credit card company I know of, with a low-ish rate, the minimum pay required one month averaged about $380 for about $17,000 in debt. But the interest paid to the company for the same month was $197, over half of what was paid. Over years, that would end up being thousands paid to the company. Now, imagine you have the discipline to only use the credit card for something you already had the money for? You get your bill for specific things you planned to spend, things you budgeted for (including fun like dinner out or a new blouse), and then you pay it. That’s it. Now, you are the one getting the benefit from the credit card company….they are loaning you the $XX that you planned to spend, then you give them that money back and you do all of that for FREE!!
—third, save (and give) before you spend
As a part of your budget, you must set aside something, even if only a small amount, to save. I would urge you to also set aside a portion of your monthly income to give to others, whether to a church, to a local non-profit that matches your joys (pets, feeding children, clothing others, environmental activity). There is something powerful about admitting that you are rich, even if you know in our country your income is not very high…compared to most others in the world, you are rich. And, better,you can be rich in love and concern for others. But love yourself too, and so save. Even if you were a server and only made $150-300 a week…take $30 of that $300 and put it into a savings account. Take another $20-30 and give it away to do good. Make it your habit and I promise you will find a massive, positive change in your life…both emotionally and financially.
–fourth, take advantage of any benefits your company provides
This is a simple way to stretch your dollars, whether through paying for insurance with pre-tax dollars or getting the company’s matching offer for putting something away into a retirement plan. Don’t think that you won’t need this help or that something like dental insurance is a luxury you can do without. Take advantage of these options. And, for larger companies, you might find benefits such as lower price for phone service or a group plan for some health gym.
–lastly, realize if you live in the USA or Canada (or even the developed “West”), you are wealthy
I know I said that above, but this is critical. We in the USA are a nation addicted to gluttony and ease. Learn to tell yourself no. Acknowledge that you actually don’t need that new outfit. Remind yourself that you have enough food already in the house and can get by without buying more. Realize it is okay for you to delay gratification and actually buy it later. Even better, it’s simply okay to deny gratification and not buy it at all. In a world where many have only a few sets of clothing, one pair of shoes and the only media input is at a neighborhood store with an old TV, you are actually well off and wealthy with all of your current possessions. Sure, if you want to buy something new, you can. I did today for my garden. However, when your spending becomes something that you think you need to feel good about yourself or because you feel deprived in some way (especially when you are spending more than you actually earn), you are out of balance and need to gain better perspective.
As we head toward the end of the second decade, I still maintain that we are heading towards a massive change and crisis. In a time like that, you having a solid grasp of financial wisdom will be crucial. There are many wise counselors like Dave Ramsey and Suze Orman who can guide you further. Determine today to Live Well by taking control of your financial future.