Organizing closets and kitchens might seem reasonable and normal but what about our finances? Do we track what we spend and review monthly statements? Do we know what’s coming in and out of our checking accounts? Most people would like to be better informed on their finances and would like to “budget” but for some it’s a daunting task and a stressful task. Where does one start? I like to think of knowledge as freedom. If I know what things cost and where my money is going, then I can make informed decisions to know where to cut spending or what I can afford to buy.
Extreme opposites, such as spending no money versus buying whatever you want at whatever cost, is common and stressful. Either the person feels locked down without hope or spends without hesitation dreading the debt and bills coming ahead. Let’s meet in the middle. Why not spend appropriately within in the knowledge you have of your finances? Here are some tried and true principles or suggestions I follow. Pick and choose which ones would help you.
1. Commit to using a personal money manager software that’s easy to use such as Quicken or Money. They are user friendly and take minutes to set up. Why?
- This allows you to ditch the paper statements and download transactions right from your online banking accounts. All your accounts (checking, savings and credit cards) will be in one neat program. You will see your balances all in one place.
- At the touch of an update button your accounts will be updated and categorized.
- After time, the program memorizes how you spend and categorized accordingly. Initially you will want to assign the appropriate categories such as coffee for Starbucks and personal care for Walgreens.
- This allows you catch fraud, unusual spending, and see credits from stores come through. You don’t have to save a paper trail to make sure you received the credit.
- You’re also allowed to tag expenses by person or event. If you need to track your kids or aging parents spending or expenses you can assign a name to expenses.
2. Consider only using a debit card. Credit cards can be used on occasion of course but too often they enable us to buy something we really can’t pay for in its entirety later when the bill comes. Why not pay now in order to reduce debt later? This also reduces how many statements or accounts you want to follow or keep track of. Save up the money instead and then purchase the item. Paying cash upfront equals no debt later.
3. Set up automatic savings as you would automatic 401k withdrawals at work. Even if it’s only $50 a month, create an automatic pull into a savings account. Next emergency, you will be able to draw on savings instead of using a credit card.
4. Assess your spending. Simple changes can make a huge difference in monthly expenses.
- Is your thermostat on a timer? Turn it down during the day and at night instead of cranking the heat or air conditioning around the clock.
- Turn off lights and electronics throughout the house when not in use.
- Get rid of your home phone. Just use cell phones.
- Reduce your cable TV package or get rid of it altogether. Subscribing to Netflix or Hulu is way cheaper.
- Cancel newspaper and magazine subscriptions that never get read and just pile up. Believe it or not, these yearly costs add up.
- Enroll in fuel discount cards, such as BP. As you pump gas, you earn rewards to reduce the cost of future gas purchases.
- If you live in a city (like Chicago) or suburb that will allow you to switch to meter reading for water usage, switch over. Only paying for what you use will be cheaper than being charged a standard amount.
5. Pay bills on time. Set bills up on automatic payment so you never have late fees again. Credit card payments can also be automatic. You can set it to pay the minimum each month or the balance each month.
6. Set up overdraw coverage at your bank. Instead of getting a fee for overdrawing or bouncing a check, give your bank permission to fund your account by drawing from your savings or linking it to a credit card.
7. Make returns within the time frame allowed. Commit to returning an item within a week if you’re not keeping it. Too often these returns go unnoticed at the back of our closet.
8. Purchase generic instead of name brands. We all have our favorites when it comes to shopping but if you can get away with buying the generic brand for something you really don’t care about, go for it. Over time buying generic adds up.
If you’d like help getting starting with a personal money manager software, Amber would be happy to help. Just ask. We have added that to our list of services in 2014!
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