4 Tips for Money Management
By: Madeline Black, Family and Consumer Sciences Intern
Do you feel overwhelmed and overcome by your finances? You are not alone. According to the American Psychological Association, money is the number one stress in America.
Stop allowing your finances to master you and become the master of your finances by implementing the following four tips:
Create a spending plan and stick to it.
A personal spending plan is similar to a budget. It outlines income, expenses, and addresses methods for saving. The first thing to do is evaluate all avenues of income, including primary and secondary cash flows. From there, list all expenses, including needs and wants. Make sure to include any debt payments, as well as a portion for saving. Once you have listed and totaled all the expenses, see if the value matches the income level. If it is greater than the income value, adjustments are necessary. Consider things that you can eliminate or other potential outlets of income. Once you have a completed the spending plan, the most important part is sticking to it each month.
Banking is a safer alternative to keeping cash, as it protects against theft, fire, and more. When choosing a bank to partner with, be sure to choose a bank that has a strong reputation. Before opening an account, ask questions and do your research. Ask about associated fees, minimum balance requirements, overdraft protection, and online or mobile banking options. Once you have a bank, open a checking and savings account. Utilize your checking account for every day purchases and your savings account for long term storage so that it can earn interest. As you utilize your accounts, you can order a debit card and checks, which can be a safer alternative to using cash.
Pay off any loans.
Individuals take out loans for an array of reasons, such as mortgages, auto loans, small business loans, student loans and etc. The term of the loan will determine the amount paid each month. However, the longer the term, the more interest that will be paid by the borrower. Therefore, it is encouraged to pay off those loans as quickly as possible. In order to be consistent in loan repayment, make sure it is included as an expense in your spending plan.
Make your credit work for you.
Having a good credit score, can save you thousands of dollars annually. With higher credit scores, you become eligible for lower interest rates and qualify for lower APR (Annual Percentage Rates). Credit scores range from 300-850. A good credit score is greater than 660, 620-659 is fair, and less than 620 is considered bad. Using credit cards is one way to build this credit score; however, it is crucial that you pay the monthly amount in full. Refer to your spending plan to ensure you are only making purchases that align with your budget.
If you have made financial mistakes in the past and feel like it is too late for you, take heart. By starting with a spending plan, you can make the necessary adjustments to get back on your feet. For more information regarding creating and implementing a spending plan, check out this EDIS publication at http://edis.ifas.ufl.edu/he827.