There is so much focus about our finances and probably still learning the right methods yourself, but that doesn’t mean it has to stop there. While there have likely been mistakes in the past, you can use your now-infinite wisdom to teach your children at an early age so they are prepared to handle money, not to mention their credit, when the time comes. In school you seem to learn about general knowledge, but finances are not one of them, unless there is a college class of course.
Certainly, the goal is to have more money coming in, compared to going out, but if you were asked how much you are currently spending on monthly bills, food, gas, spending money, would you be able to say? A good way of see exactly where every dollar is going is to take last month’s debit or credit card statement and go line by line. This way you can group the expenses together to see what you’re currently spending, what you should be, and call out those purchases that probably could have been avoided. By staying on top of spending, you can hopefully keep a closer eye and free up extra money each month.
Have Goals in Mind
It’s not our first reaction to save every penny and not spend any of it, after all, going shopping is fun, but without a clear goal in sight there may be little focus to improve finances. Whether it’s saving up for a certain event like vacation or striving to have a set amount in your savings, or even to reduce using a credit card, it’s good to have goals when it comes to your finances, while keeping them out in the open to have progress conversations to ensure you are on track.
Create a Budget
Everyone could use a little help freeing up extra money, so a budget is a great way to hone in on how much you should be spending per month. If you are over budget, then you will have to decide if the budget goals are realistic, maybe you went over, or both. By allocating a certain amount of funds for each area such as monthly bills, food, gas, and entertainment, you can hope to reduce unnecessary spending in order to generate extra cash leftover. If you think you have maximized saving, the next area to review could be reducing expenses such as cutting cable or avoid going out to eat.
Give Yourself a Cushion
You never know what unexpected event, or in this case, charge, that can come up so it’s best to be as prepared as you can be. By putting a few months’ worth of expenses into an account, you can avoid having to use a credit card or dip into savings in order to pay for an appliance or auto repair, medical or vet bill that could throw your budget out of whack otherwise. You just may not have more than a few months’ worth, otherwise having a large sum of money sitting an account could be missing out on potential growth if it were in your retirement or brokerage account.