Most families today have a checking account. However, unlike our parents or grandparents, rarely do many families have a savings account that they can count on. A BUDGET?! Balance my checkbook? What is that? Why do I need to worry about it? OR are you so overwhelmed that it is hard to start?
Sad to say that it is difficult because we were not taught these everyday skills. It doesn’t matter up to this point, so let’s just grab a pen and paper, a laptop or anything you make notes on and get to work.
My financial go-to bible is from the book Financial Fitness by Chris Brady and Orrin Woodward. The book is full of 47 principals to lead you through your financial life. These are all easy concepts, some of them are so obvious that they make you go “DUH!” why didn’t I figure that out on my own!?
Principal 1: It’s not what you MAKE but what you KEEP that determines financial success. Pay yourself first and save what you pay yourself.
First you have to gather all of the information together. Use a spreadsheet, a notebook (make it a dedicated notebook so that you can keep a running total, all information together and easy to look back through if you have a question) or a program like Mint, an online based service that allows you to add accounts, pay bills, see your credit score and more all from a centralized location. They also have a mobile app. Make it simple for yourself so that you keep up on the task. After all, no one cares as much about your money as YOU do.
What you need to start:
a CHECKING account
a SAVINGS account.
Checking: I have used ClearCheckbook for many years as my check register. It is quick, simple and straightforward. I can check from my phone or online and I have never been disappointed! I LOVE that you can make reoccurring transactions and see what is coming up. ClearCheckbook is customizable to your needs and I have found it really helps keep me on track.
Savings: Actually, you should have 3. WHY? Let me show you.
- Emergency Fund: This is the account for your FUTURE. This should be the 1st BILL you pay! Count this as a sacred account. This is the biggest step you may take. The money in this account means the difference between survival and success. You will prove to yourself that it isn’t hard to save at all as long as you have a purpose (which is you!) Try to begin with 10% of your take-home pay or better yet, 10% of everything you deposit into your checking (gifts, rebates, etc) Make it an automatic withdrawal so you learn to live without it.
- Regular Savings Account: Try to begin with another 10% of your take-home pay. Use this for the expected and unexpected happenings in life. Saving a little each month to apply toward appliances or car repair that are sure to happen. Add a bit every month for Christmas, Birthdays and the like. As you get your debts paid off, put the allocated money into savings to help increase your savings for the predictable times ahead.
FUN MONEY Account: What?! Well, why not! Make an account to go on vacation, have a special getaway, plan a little splurge…. this account is for the extra money you don’t need after the savings are done, the bills and groceries are paid, etc. Having a garage sale? Save the money here. Did you earn a special bonus at work? If you work hard in the other two savings categories and keep applying good financial principals toward eliminating your debt than you have earned a 100% Fun Money splurge.
In order to have Financial Fitness you have to be willing to learn what to do,
then take the correct action to apply the steps along the way.