The holidays are over and your account is under. I understand that it happens but don’t get upset about it. We are going to get you back on track. Realize that getting on track is not going to happen overnight. It will be a steady and slow process but once you start using these steps continuously you will develop powerful habits to create your own financial security.
Now, what is a money plan? Well, it’s really just another phrase for budget. People don’t seem to like that word too much so we are going to go with money plan. Okay? Okay! No more delaying, let’s get this show on the road.
There are many ways that you can create your money plan. You can write it on a sheet of paper, create a spreadsheet or use some type of money tracking software. But one of the most important steps is to put it all into action. We can do all the planning in the world but if you are not going to act on it nothing is going to change.
Know your current situation
Take a look at your current financial situation. Survey all your bank accounts and investments to get a good picture of where you are financially. If you do have multiple bank accounts, may I suggest Mint.com? It is a stellar free software to manage all your financial accounts in one place.
Know how much you owe
Go on ahead and get those bills together in one place. And for those you of who have your money automatically withdrawn, check your accounts online and write down your recurring monthly bill payments.
Know where your money is going
You want to track how much you are spending and where you are spending it. Joseph Equale, CPA at Equale and Cirone, LLP (www.ecllp.com) suggests that you track your expenses for a period of three months. But if you don’t feel like waiting that long, you can track it for a month to get an idea. Write down everything you spend your money on, down to the vending machine runs you may do during the day. Once you do that you can see where your money is going and it may also make you think before you make a purchase.
Know the difference between fixed and nice to have cost
There are some costs that you have to pay every month, such as rent, student loans, cell phone, car payments, car insurance, etc. And then there are others that would be nice to have but are not essential to your survival, such as premium channels, monthly movie rental programs, gourmet coffee purchases, etc. I’m not going to tell you what to eliminate and what to keep. It is totally up to you what your money plan is going to look like and whatever you decide is a fixed, must have, and what is a nice thing to have.
Know how much you want to save
The most common thing that people tend to not do is save. They get caught up in paying off bills and think that once all their bills are paid they’ll start to save. WRONG! You must to pay yourself first.
Equale suggests you save a minimum of three to six months of living expenses. If that is a bit too much right now, strive to have at least $500 in your emergency savings account.
Don’t ever think that you are not making enough to save. I’m not asking you to save $500 with one paycheck. Start small. You can save $5-$10 each time you get paid. Have a certain amount of money taken from your account automatically every paycheck. And, if you are getting a regular paycheck, Equale suggests that you save 10-15% percent of your paycheck and if you are self employed then save 10-15% of every job you get paid for.
Now that you have a clear picture of what you have, owe and need to pay and save, and a way to track it, you can make responsible financial decisions.
Do you have any creative ways that you use to manage your money?
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