Paying Your Way
The ABCs of Money Management
However much money you make — even if it is a small wage — can be maximized to work better for you if you get organized and pay attention to how much you're spending. Don't be intimidated into thinking a budget is complicated. Just remember your ABCs.
Assess If your income varies due to tips or a fluctuating work schedule, look at several months to get an average monthly income to build your budget. Record your exact expenses for a month. Your bank may offer free apps that are tied to your account to make this process easier. If you don't have a smartphone, use a small notebook to keep a record of your spending. Don't cheat yourself by changing what you would normally do during that time just because you are recording it. Once the month is up, organize and review.
Budget A simple monthly budget can help ensure you pay your bills on time, have funds to cover unexpected emergencies and reach your financial goals. Here are some things to consider when you start developing a budget.
• Savings – No matter how little you make, you must always set aside a portion to save. Many advisers recommend 10% of your income go to savings first. It may be just to cover a few extra expenses at the end of the month, handle emergency car repairs, or reach a long-term goal like a fun trip.
• Fixed Expenses – Some things you pay will be the same each month, like rent, car insurance or loan payments. These are your priority items and need to be paid first.
• Variable Expenses – These expenses may change a bit each month. Examples are utilities, groceries, gas and maybe your cellphone. These are all still "must pays."
• What's Left Over – Once you've totaled up your monthly income and your monthly expenses, subtract the expense total from the income total to get the difference. A positive number indicates that you're spending less than you earn — congratulations! A negative number indicates that your expenses are greater than your income. This means you will need to trim your expenses in order to begin living within your means. Sorry to be a bummer, but eating out often and going to movies and concerts probably won't have a place in the budget until your income is high enough to cover it.
• Sticking to the Plan – Budgeting takes discipline, but once you see the benefits that come with managing your money better, it will be less of a chore. If you find you aren't able to follow your budget successfully, it may mean that your plan isn't flexible enough. It can take revisiting your budget a few times to find the balance that works for you.
Credit When used properly, credit cards can provide benefits and allow you to build a strong credit history and track your spending better.
• Pay the balance on time. Look for a card with a low interest rate, preferably below 13%. Interest adds up when you maker purchases with your card that you can't afford to pay off when the bill is due. Sometimes, interest rates can be more than 20%, and late fees are like throwing money away. Only charge what you can pay off each month.
• Avoid fees. Look for a card with no annual fees and/or reward programs like cash back or travel miles.
• Protect your information. Never let anyone use your card. Never give your card number unless you are fully aware it is a legitimate purchase.
I wasn't always the best at managing money. I was the type that spent what I had and just managed to scrape by. Once I learned the proper way to budget, save and live within my means, I always had enough! It's a great feeling to know that I have what I need and I also have a ‘cushion' for the unexpected!" - Tiffany Miller (26) Professional Nanny, Jupiter, Florida
If you are in a financial bind, sometimes a credit counselor can help you see things more clearly. To learn more about these agencies, or to find one in your area, visit the National Foundation for Credit Counseling at www.nfcc.org
For more information on managing debt, saving and spending, visit MyFloridaCFO.com/YMM