I'm going to start off my first week of blogging writing about finances, relationships, religion, and other things that I THINK I know so much about (in reality, I only know about finances).
5 Financial Tips
1. SAVE
I read all the time about how important it is to save - and it's true. How much you should save really depends on the income of each individual household. "Experts" always say 10-20% or 6 months of rent/mortgage payments and for most of us, that isn't realistic. Saving shouldn't be a chore, it should be a habit. And there isn't a right or wrong way to save. My saving technique isn't the best, but it works for me. I always "forget" to put money aside when I get paid so I do quarterly or bi-annual payments. And I put aside 3 months or 6 months worth of money depending on how I "pay" myself. It's also important to put the savings somewhere that you aren't able to access easily (so that means not under your mattress). Once you get in the habit of saving, it becomes easier and when emergencies come up, you won't have to worry yourself about where you will get the money, it will be there. (It's also a great way to teach kids how to save for big ticket items that they want)
2. JUST SAY NO
This two letter word is the hardest thing to say.......to yourself and your family. As a society, we believe in instant gratification - we want it and we want it now. More than half of what we purchase are wants and not needs and that is the biggest mistake we make as consumers. Before making a purchase, decide if the item(s) are a want or need and give yourself a limit on how many wants per month you and your family can indulge in. At the end of the first month, you will realize how much stuff you can actually live without!
3. BUDGET
Run.......if the government can't come up with one, how can I? Budgets are so easy to create, the trick is following them. Be smart. Don't give yourself anything too unreasonable or else you will fail and then give up. Start by tracking your expenses for a month - everything you and your family spend on bills, groceries, going out, shopping, etc. Then start looking at cutting down on certain things - going out, shopping, activities each month. Focus on necessities and not wants (yes, here we go again with the JUST SAY NO). The biggest mistake is people go from 0 to 100 and that isn't reasonable. You can't go from spending $2,000 a month to trying to cut that in half. Do it little by little so it doesn't hurt as much. After 6 months of cutting back a little each month, you will get a better idea of how to budget for your household. I also recommend using a budget tracking sheet - I use this free one from microsoft:
http://office.microsoft.com/en-us/templates/personal-monthly-budget-planning-TC001023341.aspx
4. CREDIT MATTERS
I learned this the hard way. You need GOOD credit so use it wisely. There are different kinds of things that affect your credit score so keep that in mind when making decisions on whether to apply for a credit card. The main players in establishing good credit are (1) major credit cards like Visa, Mastercard, American Express, and Discover -NOT debit cards (contrary to what people say, debit cards used as "charge" do not impact your credit) (2) loans - school, car, home, personal - all of these affect your credit so paying on time is extremely important (3) property ownership.
When it comes to credit cards, it's important to not max out the card and also to pay more than the minimum. People often spend more thatn 80% of their total limit and then pay the minimum. Your credit score factors in how much credit you have as well as how much is available. So if you have $200 and spend $200 and pay the minimum $20, you really don't have a lot of credit available. It's important to pay your credit cards and loans on time. These are major factors in your credit score. And please STOP applying for all those credit cards to get 15-20% off, because there is still a soft inquiry and those add up. Hard inquiries - major credit cards, loans do affect your credit so if you know your credit isn't good, don't keep applying, it only drops your credit score. My best advice is to get a credit card (secured or unsecured) and use it for groceries or dining out and pay those off each month. That will help build your credit. Over time, once you have paid it consistently, you can get an increase on the limit and that will help open the doors to better credit. I know, that's what I did and it works.
Also, make sure if you to pay any type of loan on time. This can truly affect your credit worthiness especially car payments. Those are reported immediately on your credit when you are late. Make sure to pay your rent on time too, this affects your credit as well as your ability to lease or rent again.
5. STOP TRYING TO KEEP UP WITH THE JONESES
Be realistic about what you can afford. I often see women and men making less than me driving luxury cars, dressed in name brand clothes and shoes, with the newest gadgets and phones and I wonder how can this be? Then I find out that they are living at home with their parents or on some type of government assistance. Get a life and be independent. Being adult is when you rely on yourself and not your parents or anyone else to help foot YOUR bills. So stop buying all the latest Jordans or getting your hair and nails done every week when you are are struggling to pay your rent or bills. No one cares if you have the iPhone or what kind of car you drive - and if they do, then you don't need them.
Financial education is so important but it's not taught in schools and this explains why so many young adults have a hard time transitioning to being on their own. I hear young kids say how they just want to get their own place without realizing all the pressures that come with it - like paying rent, bills, food, and gas. It's important to be financially responsible especially if you have kids so that they have a fighting chance. Times have changed - when I was growing up, parents saved for their kids' education but now that is a lost ideal - the majority of people I know with kids haven't saved one cent for their kids' education because they are too busy living in the now. Now is great but we have to also factor in Later.
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