“Balancing your money is the key to having enough.”
– Elizabeth Warren
So how can you figure out how much money is coming in and how much is going out?
Check this out. The first step is to keep track of everything you spend money on, from car payments to cappuccino. Once you’ve done this for at least two weeks, you’ll have a good idea of what your total monthly expenses are.
Then subtract the total from your monthly income. If you get a negative number, you’re spending more than you’re taking in. And you need to make some changes. You also need to distinguish between what you want- and what you can afford.
Balancing the Budget
The first thing I did with my first bookkeeping client (myself) I made an Excel Spreadsheet and I said, ‘Okay, this is the amount of money I’m getting. And these are the expenses that I’m going to anticipate.” I decided with my new business I wanted to save $10,000 in my new first year. To reach that goal, I knew I’d have to try to keep my weekly expenditures to a certain amount. But the problem is it’s tough to anticipate expenses. It’s not like you’re spending the same amount every week. I know every “penny has to have a purpose.”
I started my first civilian job, and I was buying a $4.00 cappuccino, and a $2.00 bottle of water every day. I was quickly spending $1,000 a year on water, which you can get for free, and nearly $2,300 on coffee. I switched to black coffee for $1.50 and bought a travel mug for water from the sink.
I have a budget for myself, and I just don’t go beyond what I can. Obviously, I would like to have certain things that I probably can’t have.
Some Rules for the Road
You want to spend no more than 20% of your monthly take-home pay on debt payments. Pay no more than a third of your take-home pay on housing costs. You want to save 10% of your take-home pay.
20% for debt payments
30% for rent
10% for savingsThat’s the goal, and if you can do more, then do more.
Choosing a Bank
To help me manage my money, I looked for a bank. There were plenty to choose from, both online and traditional, with a broad range of services… and charges.
When looking for a place that will handle my money, I look at it just like I’m looking for a wife. I looked at my banking habits and choose an institution that meets the things that were important to me, just like when I go out on a date.
What I was looking for was interest rate and maybe any kind of benefits or bonuses. The first goal was to pay off the student loans. And to do that, I wanted to take my paycheck and put it into an account where I was getting a good interest rate. I found USAA Federal Savings Bank. Their online banking was easy, they were a military-specific company, and they gave me great competitive rates. I found a good savings account and checking account that are tied together. I have banked with them for over 20 years.
A bank account is a good place to start your financial life. You want to find a bank that doesn’t charge you to keep a checking account there with a low minimum
USAA is perfect for my major financial decisions. But I also choose a local bank to handle my local business. I’m old-fashioned. I don’t want to deposit my money, my cash into a machine every time. I want to hand it to someone and get her name, so if it doesn’t enter my account, I can come back and say, “Janice, I have a problem, can you help me?”
- What To Look For in a Bank: ATMs near your work or home
Most checking accounts come with an ATM card or a debit card that allows you to access the cash you deposit into your account. Like a credit card, you can use a debit card to make purchases, but you’re not borrowing money from a bank or a credit card company. You’re just withdrawing it from your own bank account. But be careful not to spend more money than you have in your account. If you do, it’s like bouncing a check. And the bank is likely to charge you a big overdraft fee.
- What To Look For in a Bank: Pay attention to fees and compare interest rates on savings accounts.
The biggest thing that trips people up with banks is the fees. There are fees for having too low of a balance. There are fees for using too many checks.
So that’s what you want to look for: an institution that is going to charge you the least amount of money to have a relationship with them.
Even if you’ve got the best bank in the world, it’s still going to be up to you to manage your money wisely. Priorities lead to prosperity. If you put your priorities first, then you will prosper.
- Separate needs from wants.
- Create a spending plan.
- Pick the right bank for you.
I work hard to keep my financial act together, but I know there are plenty of ways to mess up. For instance, any time you spend more than you take in, you’re probably making up the difference by going into debt.