START WHERE YOU ARE – Part 4 of 4: FINANCial pillar
Everyone deals with money. From a young age, you were exposed to money. Remember the tooth fairy? You found money under your pillow after you lost a tooth. Some of you quickly came to realize that you get money when certain things happen and that you can use money to buy things that you want.
What are your thoughts about money? Do you think money is evil or bad?
Your beliefs about money are directly related to the experiences you had growing up. While some people may use those experiences to be wise about money, some people may have developed unhealthy money habits.
UNHEALTHY FINANCIAL HABITS
- Too many bouts of impulsive shopping
- Buying things you cannot afford at the expense of things you need
- Not knowing the balance in your bank account
- Never saving any of your income
- Not knowing the sum of your monthly fixed expenses
- Allowing credit card companies to make money from your debts
- Eating out too often
- Refusing to comparison shop
- If you are working, this is your salary.
- If you are retired, this includes your pension, social security, and other retirement income.
Know your total monthly income, be precise.
- Calculate all fixed monthly expenses (rent, mortgage, common charges, property taxes, utilities, phone, cable, internet, health insurance, etc.).
- Other Expenses.
Once you subtract your fixed total expenses from your monthly income, you know what you have to work with. Where do you spend your money? Is it dining out, shopping, or travelling?
You need to save some money for retirement and emergencies; however, you also need money for incidentals.
total monthly income – total fixed income = working capital
If you can put money directly into your retirement portfolio pre-tax, awesome.
The working capital is used for incidentals (groceries, laundry, etc.) and emergencies. If you want to be smart, put the amount you plan to save monthly into your fixed expense column, that way you don’t have to worry about it.
It seems like a no brainer, but if your fixed expenses swallow up all your monthly income, then you need another job or you need a raise.
Keep in mind that while you want to enjoy life, running up your credit cards is not the way to do so. Plan and save money for those extravagances.
Impulse shopping seems exciting, but remember, if you cannot pay your credit card bill in full when it comes, that purchase is no longer just $100.00 (it’s $100.00 plus whatever interest rate your credit card company charges on any unpaid balance). In my book, that is wasted money.