Money, Money, Money. Say it 3 times and it’ll appear in 48 hours right? What about that money tree?
If you’re anything like me and any other average person, the words: money, budget, finance, investment, taxes all probably stress you the hell out. Honestly, the way things are these days, it should come as no surprise. This however, then means it comes to us to make sure that WE are responsible for OUR money and OUR actions regarding money. Money is NOT a bad thing. It’s needed for daily stuff: water and electricity bills, gas for your car, the Starbucks coffee for your weekly friend date, actually going out on a significant other/spouse date, buying things for loved ones and kids, treating yourself out every once in awhile… you get the gist. You spending money = it’s going to someone else – whether that be their pocket or their time. You spend money getting your hair done, your nails, your favorite latte, you’re giving someone money for working for giving that product or service to you. It’s HOW you spend that money (or the love of money) that can be the major downfall. If you’re making $2,000/mo and your bills are $2,500/mo and you’re spending $3,000/mo, you got a problem somewhere. If you’re hoarding money for selfish reasons, you got a problem somewhere.
So how does one keep that balance WHILE being prepared for whatever the winds bring next? Financial accountability and preparedness.
First of all, you gotta know what you’re bringing in AND where it’s going. Most banks these days have online banking, auto pay, special monthly reports and the such. I can’t go into them all because there is so many, but let’s start with the basics.
Gross pay (your pay X however many hours + any commissions and such – taxes/garnishes/etc (federal, state, child support, etc) = Net worth (what you actually get from your employer and what you’ll see on your check)
Cash in – bills paid – misc expenses = what you got left to work with/savings
Yup, taxes sucks. #WelcomeToAdulthood, #ExcuseMeWhat’sTheReturnPolicy
So keeping track of your money, incoming and outgoing, is very important. Alongside my own bank’s statements and stuff, I like to use a website and app called Mint (https://www.mint.com/) They are under Intuit, which also includes Turbo tax and Quick Books under their family tree. I recently came across this app and it’s pretty awesome. You can upload your bank, your credit cards, your loans (housing or student), your insurances and your utilities and it keeps track of what you’re spending, to what category (you can make your own too if you wish) and what % of your income is going where. They also have the Mint Bills app which helps you keep track of when bills are due so you can avoid those late fees AND keep your credit score up (more on that later).
So now that you know what money you have coming in and out, what do you need to do next?
Simple, you need to figure out what your credit score is.
Your score, called a FICO score, is determined by several factors: Credit Card Utilization (what % you’re using out of the total of your total credit line), Payment History, Derogatory marks (super bad), age of credit history, total number of accounts and Hard Inquiries. Check out your credit score often. It’s super important to know what you’re working in. Credit scores can range from 300 to 850, which in almost all cases, the higher the score, the better chances you have of getting a line of credit, a credit card, a car or a house. Sometimes having it too high makes lenders think you don’t have enough credit built up. However, you don’t want to go spending all willy-nilly just in the name of getting credit.
Here are the following factors that make up your credit score:
- Credit card utilization – 0-30% best, it shows that you understand how money and credit works and that you’re not being irresponsible nor reckless with your finances. This IS a high impact factor.
- Late Payments – 99-100% is considered good. Even ONE missed or late payment could drop you! It’s crazy! This is another high impact factor.
- Derogatory remarks- this includes any collections and public records. Just one of these can drop you too. This is the last of the high impact factors.
- Years of Credit History – 7+ years is best for credit card history as lenders want to use that you have experience using credit. It’s only considered a medium impact as it takes time to build this kind of history and while it’s mainstream to carry several credit cards, not everyone does. I got my first credit card right before I started college (started out with a $750 credit line because I was so new) and now I have a $2250 credit line. On average as well as in my experience, if you’ve been good (or if you ask), a credit card company will give you more credit. Recently my Best Buy Credit card (which I opened 2 years ago to get my laptop) gave me an extra $900 credit line (which sadly, yes I have used a fair bit of it to get both my mom and I Fitbits ($150/pop) + warranties + tablets were on sale, so that was other $180 + warranties. Yeah, we’re good now on electronics. My mom needed it for health reasons and she’s paying me back, so it’s all good between me and her, but if someone was to run my report, the % used is gonna look high to lenders. Just be prepared if a similar scenario happens to you and you get declined, that’s a good indicator why.
- The number of accounts you have – 11+ accounts is what lenders what to see – this might seem high but it’s because lenders want to see once again that you have experience using credit and that other lenders don’t see you as a risk. This is a low impact on score.
- The number of hard inquires – Hard inquires sounds scary, but being a low impact factor as well as depending on how your credit gets ran by a lender, it’s nothing too much to worry about. Typically 0-2 is fine, but when you get 5+, that’s when it *could* pop up a red flag depending on the bureau and the lender. For example, currently, one of my credit bureaus shows 2 hard enquires while another shows 13! I was looking at getting a car and they ran almost against every bank they work with to see who could get me a good deal. I ended up not getting the car due to several reasons (and I’m glad because I had to take another job to make ends meet and it was $4 less an hour which made a BIG difference), but those inquires still show up. Granted, they’ll fall off here in about another year, but I can always tell someone why it might show up as a red flag and they’ll notate that and understand. Again, this is not a high impact factor, so don’t sweat it.
You can order a credit score report for free (remember that stupid commercial!). You can also check out each individual bureau (pain in the neck).
So that’s why I use the Credit Karma app and website (https://www.creditkarma.com) to keep track of my score. Also, my Capital One credit card account also keeps track of it too. These numbers can differ greatly (one time I had a scores with a 30 pt difference!), but you could always keep an average of these and go from there. It’s kind of annoying to do so, but read this to understand why they do: www.myfico.com/crediteducation/questions/different-scores-for-3–credit–bureaus.aspx
So how that you know how much money you have coming in and what your score is, now is the time to look at savings and investments.
If you’re like the average person and struggle with money flow (cash or plastic), budgets (I know, I said the bad word) or just have no clue what to do, never fear! I have some awesome resources for you.
First of all, start with your bank! See what they offer to their members, you might be able to get the best deal here or one comparable. Because you are a member, or someone in your family is, you could at the very least get some kind of special promotion or discount. Banks offer all kinds of things, some things you might not even think of. For example, I have a Credit Union type of bank and for personal options (non-business), this is what they offer:
Kinda impressive right? Also kinda overwhelming. Go talk to your bank, they’re trained in this, this is their job. My bank even offers knowledge:
While they will try to push their products, they are there to help you with what you need. If it doesn’t work out for you, then you at least have an idea what’s out there and can shop around wisely.
Another good place to start with http://www.adp.com/tools-and-resources/calculators-and-tools/payroll-calculators.aspx. ADP is a human resource and payroll company (I’ve had my paychecks come from them a couple of times and I’ve never had problems!). This link has calculators for salary, hourly, gross pay vs net pay, 401k investment calculator, the works. Definitely a good way to figure out what you’re making (especially if you’re making salary and need to break it down into hourly for reporting) or if you’re looking to get a new job, what you need to be making to make ends meet or what to expect post *estimated* taxes (each state has their own taxes and they are uploaded already in these calculators, NO math for you!)
So how that you know how much money you have coming in and what your score is, now is the time to look at savings and investments.
I HIGHLY recommend Dave Ramsey’s (http://www.daveramsey.com/home/) Financial Peace University (FPU) and his books and radio show. This is a man, and his wife, who had it big, lost EVERYTHING, started all over from the ground up and learned his lesson, taught his kids those lessons so they wouldn’t have to learn it the way he did and they are now living the American Dream. I’ve done his class twice and I’d do it all over again! You might have even heard of his 7 Baby Steps (http://www.daveramsey.com/baby-steps/?snid=footer.tools.babysteps):
- Baby Step 1 – $1,000 to start an Emergency Fund (or $500 if you make under $10,000/yr) – this is for if the car needs a new engine or tires or if there’s a medical emergency or if you lose your job or get laid off, you have something to eat, bills, gas for the car to find something else.
- Baby Step 2 – Pay off all debts using the Debt Snowball – You pay off your smallest debt 1st and the once that’s paid, you take your next smallest bill and use what you’re paying monthly now + what you had already budgeted/spent for the previous bill (basically no more just paying the minimum payment and not getting anywhere)
- Baby Step 3 – 3 to 6 months of expenses in savings – what if you were to lose your job right now and no one (family or friends) could help you by sending you money, would you be able to make it?
- Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement – face it, by the time most of get to 65, there is either NOT going to be social security or it will be even MORE less than what it is now.
- Baby Step 5 – College funding for children (it’s only gonna get more expensive! I went to a technical college, got my 2 years and for 5 semesters, it was still about $10,000 for al my education – luckily I got lottery tuition funds and some scholarships and only had to get $2,000 loan. I graduated May 2012 and I just technically paid it off this month (September 2016).
- Baby Step 6 – Pay off home early (wouldn’t that be nice!)
- Baby Step 7 – Build wealth and give! (Yes!)
Pinterest, naturally, is chock-full galore of money saving tips and ideas. As we’re beginning to wind down to the end of the year, I’m beginning to already plan for next year and for tax return season (this year’s taxes will have a lot less W2s – I had 5 last year + Obamacare insurance stuff, just yeah… it was a little rough). Check out my recently made Pinterest board, Show Me the Money! (https://www.pinterest.com/CresMoonStars/show-me-the-money/). I’ll be adding tips and tricks that actually made sense and cents (like that did ya?) and not just anyone’s tips and tricks. One I’m particularly looking in trying to do is the 1 year/52 weeks saving plan. This plan has been out there for awhile, but THIS chart below shows you the different ways to save the same money depending on your paycheck style (there’s even a kid version one now!).
I’m so used to getting paid every 2 weeks, but at my current job, I get paid semi-monthly (1st– 15th, get paid on 20th, 16th -30th/31st – get paid on 5th – IT. FREAKING. BLOWS. GETTING PAID SEMI-MONTHLY. But it pays the bills and I’m getting more than I would elsewhere, so there’s #TakingOneForTheTeam.
There is also a reverse option for those who would rather not pay out so much at the end of the year. You could have slow seasons in your industry, you have the holidays, you have kids out of school more towards the end of the year, you have weather costs depending where you live (or don’t live).
You’ll also find all kinds of bloggers out there about saving money, DIY, how to bring in more money and such. Emilie Burke over at Burke Does (http://www.burkedoes.com/finances/) is one of my fave blogs to read about how to handle your money. She’s down to earth and honest about money handling and how she does it. She even posts accountability posts, documenting where she’s saving money and on her finances page, has a Debt Snowball widget in her sidebar. Check it out!
So I hope that financial accountability and preparedness hasn’t scared you. While it’s not the easiest thing to manage in the world, it can be done with some knowledge, wisdom and some discipline.
What do you have questions on regarding financial matters?
What are some of your ways to keep track of your money?
Do you use any apps or special programs?
How do you save money or if you don’t, how could you?
Share with me your stories, experiences, tips and tricks. Tweet me some links of finance blogs or gurus. Send me some pins on your style of getting money in and out and how to save some. Knowledge is power right?