Managing Money

  • “Money moves from those who do not manage it to those who do.” –Dave Ramsey

    Budget: a plan on how to spend and save your money

    Fixed Expenses: Costs that are the same each month
    Examples: Rent, insurance, subscriptions

    Variable Expenses: Costs that change month to month
    Examples: Groceries, gas, entertainment 

    Short-Term Goals: 1-2 years
    Examples: Paying down a credit card or building an emergency fund 

    Long-Term Goals: Goals that take more than 1-2 years
    Examples: Retirement, college, kids

    1. Calculate how much you make in a month (After taxes) + any extra income

    2. Track your spending : Figuring out where your money goes

      1. Determine where you are spending your money the most

      2. Do this for a few weeks to understand your spending habits. You can use RocketMoney.com to help track

      3. Check credit card/bank statements to know your spending 

    3. Group your bills/fixed expenses together

    4. List variable expenses (this is where you will find opportunity to cut back and save)

    5. Set goals: Make a list of short term and long term goals

    6. Make a plan based on your research and fill out a budget worksheet

  • Free Budget Guide:
    • View Guide

    Free Budgeting Apps:
    • Rocket Money

    Free Budget Template:
    • Download Template

  • Create two categories: Things you NEED vs WANT.

    Example: If you drive to work, gas would be a NEED, but a Spotify membership, while it will make your drive better, is a WANT and not necessary to get you to work.

    *It may seem small to cancel a small subscription – but it adds up in the long run.

    YOU are in charge of what is a WANT vs a NEED and those may be different from person to person.

    50/30/20 Budget:
    50% Needs
    30% Wants
    20% Savings or Debts
    (Click to view graph)

    Review your budget regularly and change it to fit you if something isn't working for you.

    Six Steps to Creating a Positive Money Mindset:

    • Forgive your past financial mistakes. No one is perfect. 
    • Understand your thoughts and emotions surrounding money.
    • Realize that comparing yourself to others is a losing game.
    • Work on forming good habits.
    • Create a budget that brings you joy.

    Should you pay down debt or save first:

    If you do not have savings at all it may be best to start that BEFORE paying off debt – in case of an emergency.

    Building a savings can give you comfortable room to be able to pay off debt.

  • “Rich people believe ‘I create my life’. Poor people believe ‘Life happens to me.’” –T. Harv Eker

    Understanding your spending habits:

    • Will I be able to pay off what I spend?
    • Understand you will pay extra interest money with every purchase 

    Other ways to build credit without a credit card:

    • School loans
    • Car bill
    • Paying rent through Affirm


    RISKS:

    1. High Interest Rates

    • Credit cards often carry high interest rates (commonly 15-30% APR) if you carry a balance. This can make even small purchases significantly more expensive over time.

    • Credit card interest is charged on a daily basis so if you do not pay off your balance every month, the amount you owe continues to get larger. For example, if you charge $25 on your credit card for dinner one night, the interest charge of 15% will be added to that charge. So you will now owe $28.75. Then the next day you will be charged interest on that total.  So the total balance on your credit card will continue to grow each day because credit card interest compounds daily. This is why credit card debt is so expensive.

    • Paying only the minimum payment can lead to long-term debt due to accruing interest.

    2. Overspending

    • The convenience of credit cards can make it easy to overspend or live beyond your means, leading to financial stress or unmanageable debt.

    3. Debt Cycle

    • Carrying a balance month to month can create a cycle of debt that's hard to break, especially if you're only making minimum payments.

    4. Hidden Fees

    • Many credit cards have fees such as annual fees, late payment fees, cash advance fees, or foreign transaction fees that can add up.

    5. Impact on Credit Score

    • Late payments or high credit utilization (using a large percentage of your credit limit) can hurt your credit score.

    • Closing old cards can also negatively impact your score by reducing your credit history length.

    6. Fraud and Identity Theft

    • Credit card fraud can occur if your card or information is stolen, though most credit cards offer fraud protection.


    PROS:

    1. Building Credit

    • Responsible credit card use (paying on time and in full) can help build your credit score, which is important for securing loans, renting apartments, or even getting certain jobs.

    2. Convenience

    • Credit cards are widely accepted and offer a convenient way to pay without carrying cash.

    3. Rewards and Perks

    • Many cards offer cash back, travel rewards, or other perks. However, these benefits should not tempt you to overspend.

    4. Safety

    • Credit cards often provide better protection against fraud than debit cards. Charges can be disputed, and you're not liable for unauthorized purchases in most cases.

    5. Emergency Tool

    • A credit card can provide financial flexibility in emergencies if you don’t have immediate access to cash, but relying on it for emergencies should be a last resort.

    6. Access to Benefits

    • Some cards include benefits like travel insurance, purchase protection, extended warranties, and access to exclusive events.Responsible credit card use (paying on time and in full) can help build your credit score, which is important for securing loans, renting apartments, or even getting certain jobs.

    7. Convenience

    • Credit cards are widely accepted and offer a convenient way to pay without carrying cash.

    8. Rewards and Perks

    • Many cards offer cash back, travel rewards, or other perks. However, these benefits should not tempt you to overspend.

    9. Safety

    • Credit cards often provide better protection against fraud than debit cards. Charges can be disputed, and you're not liable for unauthorized purchases in most cases.

  • “Beware of little expenses. A small leak will sink a great ship.” –Benjamin Franklin

    1. Take Advantage of Free Resources

    • Libraries: Use libraries for free books, audiobooks, movies, and sometimes even classes or events. Many libraries also offer eBooks and eAudiobooks online.

    • Community Events: Attend free events in your area, such as concerts, festivals, or workshops. Check local community boards or websites for listings.

    • Public Parks and Trails: Use parks for free outdoor activities like hiking, picnics, or exercising.

    • Free Samples and Trials: Look for free samples of products or trial versions of apps or services before committing to a purchase.

    • Coupons and Promotions: Take advantage of free items or discounts offered through coupons, loyalty programs, or special promotions.

    2. Cut Entertainment Costs

    • Replace paid streaming services with free options like ad-supported streaming platforms (e.g., Tubi, Peacock Free).

    • Organize game nights, movie nights, or potluck dinners at home instead of going out.

    3. Utilize Free Education and Training

    • Enroll in free online courses or watch YouTube tutorials to learn new skills. Websites like Coursera, edX, and Khan Academy offer free options.

    • Use free apps or software for personal development, like Duolingo for languages or budgeting apps like Mint.

    4. Reduce Fitness Costs

    • If you can't visit your gym, use free fitness apps, YouTube workout channels, or outdoor spaces for exercise.

    • Check for free or low-cost community fitness classes.

    5. Food Savings

    • Look for free food distributions or community pantries if you're in need.

    • Take advantage of apps like Too Good To Go or local Facebook groups where people give away leftover food or produce from their gardens.

    • Grow herbs or vegetables at home for free or very low cost.

    6. Borrow Instead of Buying

    • Borrow tools, equipment, or party supplies from friends or neighbors instead of purchasing them.

    • Check for "tool libraries" or lending services in your community.

    7. Reduce Utility Bills

    • Use free tips and tricks to save energy, like unplugging unused devices, using natural light, or drying clothes outside.

    • Take advantage of utility company programs that provide free or discounted energy-saving tools, like LED bulbs or weatherization kits.

    8. Use Free Budgeting Tools

    • Track your spending with free apps like Mint, or use a simple spreadsheet.

    • Set up automatic savings transfers to build your savings without even noticing.

    9. Embrace "No-Spend" Days

    • Designate certain days where you spend no money at all. Plan ahead by using what you already have at home for meals, entertainment, and other needs.