First step: Pay yourself first!! So how do you make that happen? Grab your checkbook, paycheck stubs, and bills. I would use a spreadsheet, but it’s not necessary, it will just set you up better for the future.
Make a list of Living expenses: Rent or mortgage, car payments, lights, Internet, food, childcare, and everything you need to survive. This does not include entertainment.
Now, make a list of all of your income, monthly. Now you have a total of your monthly income and your monthly expenses before entertainment. What do you have left to save? If you are not living above your means, GREAT, we can go straight to adding your name to the Living expense column with a figure that should at least be 20% of your total income. For example, if you make $3000 a month, $600 should be the payment you make to yourself every month in the form of savings. That means $150 a week is “YOU” money.
Now, more than a few Americans can’t do 20%, but they still should add themselves to the living expense column, and decide an amount that they will pay themselves every month. That is your emergency or rainy day money. If you’re the person earning the money, shouldn’t you be on that list of payments??
Now for those that did the math, and found out that they are upside down, and have more expenses than income, that means you are affording things and not purchasing things. A dangerous place to be in. You can afford anything until you can’t. A huge amount of people found out the hard way in 2020. If you want something, but couldn’t afford to buy it outright with cash, think twice, and then a third time.
When you buy something with credit that does not appreciate in value, you are just throwing at least 30% of your income out of the window every month. That means if you pay $2000 a month in credit card and loan payments $600 is going to someone else. Some stranger that wouldn’t even look you in the eye if you passed them on the street. And that’s $600 a month equals $7200 a year. Do your own numbers and see what waste is leaving your pocket monthly. It will shock you.
So go back to what you are paying every month on that list and make sure it’s improving your lifestyle and not ruining it. Pay yourself first every month, because you are worth it and buy things, and don’t just afford things. Turn on the alert on your credit card and debit card so that you are reminded every time you spend money. And fill in your expenses and income, and savings every month on your spreadsheet. Money is like AIR, you never want to run out?
), I’d be curious to know why and how you manage your money.
