Some people call it financial literacy, and some call it financial capability. It can mean everything from tracking your money to mastering the stock market. According to Investopedia.com, “the primary principles of financial literacy include learning how to budget, track spending, effectively pay off debt, and properly plan for retirement.”
I call it...
Understanding your money.
CapitalOne released a survey in 2021 that stated 73% of Americans rank finances as their number one stressor. And let me tell you, this applies to folks in poverty and multi-millionaires. We, as a capitalist society, delegate power to money, so the fact that 73% of us stress about it makes total sense. So, today, let’s chat about ways to lessen that angst.
1. Know Your Numbers
The “head in the sand” game doesn’t work when it comes to money. We can’t wish our bills away or pretend not to notice our bank account balance declining. We must know our numbers. This doesn’t mean you have to know to the penny how much you spend on hair & nails each year (which I do… $1,228.94 ), but you need to know how much you have coming in and how much you have going out.
2. Pay Yourself First
You’re not going to save money if you leave it for last. You’ll blow through it and wonder where in the hell it went. Amirite? I slightly modify the "Pay Yourself First" model. The important thing is to make sure you find a flow that works for you. As a guideline, here’s how I recommend handling it:
Know how much you need to cover your obligations (housing, debts, transportation, etc.)
Then, put money toward retirement
Then pay your bills
Use what’s left toward savings and/or playtime!
3. Use a Zero-Based Spending Plan
Now that you know your numbers and plan to pay yourself first, let’s put that info to use! When creating your monthly spending plan (aka budget), give every dollar a job. Let’s say you bring in 10k a month:
If 4k goes to obligations,
If 1k goes to retirement (this is a made-up number, not a recommendation),
what are you going to do with the other 5k?
GIVE THAT 5K A JOB.
How much goes into that savings account if you’re saving for a car?
If you’re saving up for a vacation, how much into savings?
When you're done there, you'll know how much you have for playtime.
4. Don’t Keep Savings in Your Checking Account
Suppose you have money allotted toward a savings goal but keep it in your checking account. In that case, you think you have more money to use than you actually do.
Keep your savings out of sight, hopefully keeping them out of mind until you’re ready to use them.
And, not to mention the interest you'll be losing out on if you keep it in checking. Oy! Go on and get yourself a High Yield Savings Account!
5. Set Money Aside for Sporadic Expenses
Nothing throws off a financial system more than a “surprise” bi-annual $600 insurance bill. Instead, set aside (in a savings account) $50/mo. for that expense.
ps… do this for all larger expenses
Do you have a vehicle tune-up soon?
How about that annual vet bill?
Any professional dues/fees?
When you understand your money, you have more freedom (in life, in marriage, in general).
Here's to lowering financial stress!
Melissa Mittelstaedt
Money Coach | Accredited Financial Counselor®
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