I never gave much thought to management of personal finances until recently. I was a musician, on the road, and I preferred to let my wife handle our family money. It was an irresponsible move on my part that would come back to haunt me.
Now I’m separated, facing divorce, and looking to rebuild a personal and professional life for the first time in two decades. Worse, I’m on my own and taking a crash course in personal finance and responsibility. Add to that the fact that as a single person writing for a water mitigation blog, I’m working with a lot less than I had originally and you begin to see the dilemma.
So, for this blog entry, I decided that I would do some research and establish a financial game plan, one that not only works for me but that can hopefully help other people out as well. Some things are common sense, others I am just discovering at the tender age of 44. So let’s jump right in, shall we?
Get Paid What You Are Worth. When deciding on a career and pursuing a job in that arena, do your homework and make sure you know what that position is worth, on average. That way you won’t price yourself out of the market and you won’t end up in a job that may be underpaying you by thousands of dollars each year.
Spend Less Than You Earn. Oh if only our government could learn this particular gem. No matter how much or how little you get paid, if you spend even a penny beyond that, you will slowly but surely go broke. You don’t have to make huge sacrifices or drastically alter your lifestyle, just make sure the amount going out is smaller than the amount coming in. It is not rocket science.
Don’t Impulse Buy. Ask yourself repeatedly “Do I NEED this?”, and if the answer is “no”, then walk away from it. If you have to have it, pay for it with cash instead of adding to your credit card balance. Hey, we all had to save up for things we wanted as kids, so what makes us think we are entitled to instant gratification now?
Take Stock Of ALL Your Money. Keep track of your money to determine how much you actually have. This includes cash on hand, bank balances, available credit lines. Knowing where you stand helps you determine exactly what you can do.
Stick to a budget. This is not as hard as it sounds. For me, it simply involved making a spread sheet with all my expenses, then checking it every month to make sure I was staying reasonably close to those goals. Some items are fixed, such as cable or internet bills, while others will fluctuate, such as water, gas, groceries, etc.
Try to determine how much you will spend on various items each month and make every effort to stick close to it.
Pay Off Your Credit Cards. This was one thing that was drilled into me early on. Don’t run balances from month to month because you will end up paying out the nose in interest payments. Cards are so easy to use in lieu of cash that they can result in debt spiraling out of control within a couple of months. Learn to use them for the tool they were always intended to be, not as the lock on a cell of ever increasing debt from which there is no return.
Set Goals: Paying off debts may not come quick or easy. Look at what you owe and develop a methodical plan for dealing with them, one at a time. Maybe choose a smaller card debt and plan to have it paid in full within a three month period. Stuff like that.
Save Something. Once you have paid your bills for the month, see what is left over. Now resist the urge to go out and spend it. Put at least part of it into a savings account. You’ll be surprised at how quickly it adds up and before too long you will have a rather impressive nest egg socked away.
Invest. Finding profitable stocks or bonds to invest in never hurts. The savvy investor can do quite well in the market. Don’t put all your eggs in one basket though, find a number of different options to invest in. That way if one tanks, you still have chips on the table.
Make The Most Of Employment Benefits. Flex spending accounts and medical and dental insurance are worth a lot. Maximize the use of them as it reduces taxes and out of pocket expense.
Contribute To A Retirement Plan. Even though more and more employers are doing away with retirement plans (this morning’s news reported that many baby boomers will not be able to afford to retire as they had hoped for), you can still put money into an IRA. Make sure you make provisions to be able to live once you have left the work force.
Keep Good Records. Now this is one that I have issues with, because the most detailed records I ever kept were set lists taped to the stage in front of me. You need to make sure that you provide for as many allowable income tax deductions and credits as possible. Have a system in place and use it throughout the year. That will make it much easier to organize and recall once tax season rolls around. You don’t want to miss a single item that might save you a buck or two.
If you are a young person just starting out, then effective financial management means that you will be able to successfully provide for your future and that of your family. Even if you’re an old(er) guy like me, having to start all over midway through the game, you can still take control of your situation and at least make it better. It is easy to become one of the many…take the steps now to stand out in the financial marketplace.
Now go therefore and manage your money like the pros…
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