Planning for your Financial Future

There is no question that issue of finances is a stressful topic. Especially when talking about your own finances. There is so much trouble to get into. It often feels that one simple mistake could end up costing a lot. But just remember that the key to having a successful financial future is to plan and implement! The following are a few keys to managing your finances that might help:

1. BUDGET! I can’t reiterate this point enough to you. Without a budget, you have no idea what you can spend and what you can’t. Have you ever taken the time to sit down and add up all your bills and compare that to your income? Many people living month-to-month have never done this. If they had, they might see how easy saving money could be. Simply by seeing the numbers, it’s easy to figure out where to cut costs.

2. Assume extra costs. Anytime a budget is made, there are slight variances. Maybe you average out how much gas you buy for your vehicles on average. Perhaps the electricity bill is inconsistent. Did you remember to jot down all your bills? Making mistakes on your budget might slow you down as you try to save. Try to plan for “incidentals” that occur throughout the months and year. For example, does your car need an oil change every month? Probably not, so you would never put that on a budget. But you should be doing it every three months or so, so that cost would fall under the “incidentals” portion of your budget that month. You might not actually spend it all, but at least you could save any unused portion!

3. Prepare a savings plan. It’s important to save money. Emergencies happen all the time, and if you can manage to pay cash for these emergencies, you will avoid major financial distress at a later time. Credit cards, personal loans, and mortgages will end up costing you a lot of money in interest, so you might as well have a goal of saving instead of spending. One easy way to prepare a savings plan is to look at your taxes. My wife and I used to always get a tax return. But a tax return means that you gave the government an interest-free loan for up to one year. We spoke with our accountant, found a tax table, and figured out how many withholdings would pay our estimated tax, and adjusted our withholdings accordingly. We then set up a high-yield savings account (earning 4%) and directly deposited the difference. That turns out to be $250 per month that is being sent straight to a savings account. Not only does it earn interest, but it is also available to us if we have an emergency. In the two years we’ve been doing this, however, we have not experienced an emergency and now have a huge savings account that could withstand a pretty big emergency.

4. Don’t use credit cards. What many people don’t know is that credit cards are free money if you actually pay the balance in full every month. But nobody ever does. And then interest hits along with the finance charges, late fees, and any other fee the credit card companies can come up with. Many people choose to put money into a simple savings account instead of paying extra on their credit card, but that is not wise. What does a savings account pay you? 1%? Now look at your credit card’s interest rate. 10%? 15? 20? You’ll actually earn more money by paying your credit card off early. After all, a penny saved is a penny earned, right?

5. Perform check-ins. After you’ve prepared a budget, live on it for three months. After three months, go back and review the budget. You might have completely under- or over-estimated various costs. You want this to be as realistic as possible, so be honest with yourself regarding changes. Compare your bills and receipts to what you budgeted and make adjustments for future budgets. Then, perform another check-in every three months.

These are a few of the tips I’ve had success with. Hopefully, with these tips and maybe more, you can find financial success in the future!