It is important to have a few basics regarding money management in mind before you proceed. Not everything that is possible today is necessarily something you want to use. For example, it is possible to carry balances on your credit cards from the day you get them to the day you die. Some people may choose to do this simply because it is possible to do it and because they believe it is a harmless way to handle their expenses. The truth of the matter is that this is not a good way to handle your expenditures. In fact, it is the worst possible way to handle them. Throughout this resource, suggestions will guide you in managing your income so as to maximize your ability to meet the needs of the present and future. Carrying debt on your credit cards, month after month, and year after year will do exactly the opposite. As tempting as it may be to charge beyond your ability to pay in any given month, it does not take long for it to begin to stand in your way when it comes to reflecting your values and meeting your financial goals.

Start with the Basics

1. You will need to reduce and eliminate debt. Much of the debt carried by individuals and families prevents them from meeting their financial goals.

2.  You will need to have in place the insurance policies that are appropriate to your situation. The risk associated with not having the right coverage is simply too great. You need to make informed decisions about what insurance you need to have and how to go about getting it.

3.  You need to make a decision about how you will be housed. Most people start out renting a place to live but a growing percentage of the population own their own home. There are good reasons to rent and good reasons to own.

4. You need to have an emergency fund. If you haven’t learned it yet, you will soon: Things break…and they seem to always do it at the worst possible moment. Just when you think you are about to get ahead or, even worse, just when you think you are stretched to the limit, another repair bill looms on the horizon. An emergency fund will help you deal with unexpected expenses and be an important part of your insurance and investment decisions.

Many people have jobs while in high school or during their college years that are not sufficient to meet their living expenses. They are designed instead to provide funds to supplement the support received from family and other sources. You will find this resource helpful as a learning tool but you may have to defer implementing many of the guidelines found here until you start your career.

Your paycheck needs to be in a usable form: in a checking account and cash. In most cases, it is best to have your paycheck deposited directly to your checking account. In fact, we are rapidly reaching a point where there is no other option available. Employers have found it to be more cost effective to arrange for direct deposit than to issue a check each pay period to each employee. If that is the case, you will need to visit the bank on a periodic basis to withdraw money needed for small day-to-day expenses. A lot of people use ATM cards for this purpose but there is often a charge for that service, so you want to minimize that if possible. There is no charge for walking into your bank and withdrawing funds. With a little advanced planning, you may never pay an ATM service fee.

Shop around for a bank that meets three basic criteria: branches conveniently located near your employment and your home; free checking with a minimum balance within your capability; and some interest paid on your balance. Every small amount helps and, when added together with other things you do to save money, will amount to quite a bit over time.

This is where it all happens. You need to have a basic plan of how you will spend the money you receive, efficient ways of actually spending it, and some way of keeping track of your expenditures so that they can be compared to your plan.

The spending plan (aka Budget!) must be realistic. Couples will need to work through it together because it will take both of them to make it happen. It needs to be specific (every dollar of income needs to be budgeted for some purpose) and it needs to be flexible (money can be overspent in one category and underspent in another) in order to respond to the challenges you may face.

As mentioned earlier, most people have found it helpful to have a checking account to receive income and from which to pay bills. Each month you will need to reconcile your bank statement to make sure the balance you are working with is indeed the correct balance. It is quite user friendly these days, and many of the record-keeping software programs include a simple way to do this. Banks do make mistakes and so will you once in a while, so it is important that you know how much you truly have in your checking account.

You need to have a method to handle bills as they come in each month. Usually this means putting them somewhere so they can be easily found at the time they need to be paid. I have found it helpful to have a drawer in a convenient place in the kitchen for this purpose. It allows me to put everything in one place and know where to look for it when it needs to be paid.

As part of your bill paying, you need to have a way to compare your credit card statements to the charge slips you gather up each month as you spend money. One of the ways people learn about “identity theft” is by observing unauthorized charges on their credit cards, so you need to protect yourself by knowing about every charge that appears. If you find unauthorized charges or charges that come in higher than they should be (you charged $12.95, and they have it as $21.95) you will need to know this so you can contact the credit card issuer and get an adjustment to your bill. Keep all your receipts in one place and check them off against the statement at the time you pay the bill.

You need to have some convenient way to put some of your money into a savings account, where it can accumulate to meet the cost of periodic “big ticket” items or to cover emergencies. Know what these are likely to be and make sure you are setting aside money to take care of them as they occur so you do not run into problems just because a bill comes due.

Online Bill Paying

A lot of people pay bills online, which provides additional challenges when balancing your checkbook. You will need to make sure that automatic or electronic withdrawals from your checking account are recorded in your check register so you do not run into problems with a negative balance and the associated charges.

Records

You need to have some method of recording all expenditures, whether made by check, credit card, direct withdrawal, or cash. All of these expenditures need to be summarized against the budget you have developed to assist you with future planning. There are some excellent computer programs available that will make it easy for you to track your expenditures without a huge commitment of time and energy. Choose one and get started on managing your resources.

Even if you pay someone to do your taxes, there is a need to set aside the relevant documents each month to complete your tax forms when they come due. Know what information and documents you will need, and set up a filing system so that when you go to prepare your income tax returns they can easily be summarized.

A couple of times each year, take a look at how your investments are doing. More will appear about this later. For now, you just need to know of the need for periodic review of your investments and how they are performing.

Even though it is not a good idea to have any consumer debt, if you find yourself paying some off right now, you need to set up a payment plan so you can get it paid off as soon as possible. Have everything in one place and make sure that each payment is recorded accurately. Challenge any discrepancy as soon as it comes to light so that you do not run into problems down the line.

WEB SITES:
http://www.usaaedfoundation.org/financial/bi03.asp