The following post is inspired by a fellow survivor who needs some guidance with money management. We know that, unless one takes specific college courses in this, some are not taught the very fundamental basics of money management.
It is my pleasure to now pass down some tips for managing money that my dad taught me when I was 17 and getting ready to move into my first apartment. The foundation for managing money is knowing what you have coming in versus what you have going out. And the good news is, you don't need anything more than a basic knowledge of addition, subtraction, multiplying, and dividing, with the occasional calculation that requires a percentage.
To get started, you want to take a look at what you actually take home each paycheck, not the net earnings. The amount you actually put into the bank is what you will start with. Then, you can follow these easy steps to determine if you are spending more than you are earning!
Note, this may be a little different for those who are not earning a straight hourly wage. If this is the case, reach out to me and we will schedule a time for a special session to help you organize your checkbook for the low cost of $20 for one hour. This same offer is for those who are earning an hourly wage but would like assistance with understanding the following tips better.
For straight hourly earners:
1. Take the amount you are paid from one check and multiply it by the number of checks you receive per month (i.e., if paid bi-weekly, multiply the amount by 2). This will give you your monthly income amount.
2. Next, locate and tally up all your required bills (i.e., rent, mortgage, electric, gas, water, credit card, car payment, phone, loans, etcetera). Add up all additional monthly payments you make such as music streaming, gaming, or any other extra bill. These are your monthly expenses.
included in your monthly expenses are groceries, gas (if you drive), and necessities. If you are unsure how much you are spending on these, you can give it a best estimate or wait until you can obtain receipts for one month of all necessities, gas, and groceries you purchase to get the most accurate amount. Then add that to your monthly expenses.
3. Now, subtract all your monthly expenses from your monthly income. If you end up in the negative, this means you are spending more than you are earning. The harsh truth is there are some decisions that have to be made and with that will be some sacrifices.
If you break even, this is not bad, but you may want to still make some adjustments somewhere to have enough for emergencies and a little savings.
Here are some tips to analyze and make some adjustments.
1. Ask yourself what monthly expenses are an absolute need vs want. There are differences. Whatever is not a "need" should be analyzed further for potential elimination for as long as it takes to regain better control over your finances.
2. Analyze what bills, like credit cards, you can work towards paying off. Or any other debt for that matter. What bills can you work on to pay off? Not every bill we have is recurring unless we keep using the service (i.e. credit cards and loans).
Whatever doesn't meet the requirements of a "need," is a "want" and is not a necessity for your daily living. It is going to take some time and dedication to work all of this out. And patience. Setting goals to pay things off is not a bad thing either. It teaches us to be more disciplined.
And the great news is.....it won't be that way forever. Eventually, as you learn to manage your money better and things start to improve, you can treat yourself to a new "want" that you had to sacrifice for a little while.
And that's it!