How do you learn to manage money?

[AHardDaysNight]

How do you learn to manage money? I swear, I am almost 30 and still can't balance the checkbook.

Edited November 4, 2011 by AHardDaysNight

[AHardDaysNight]

I just watched the very funny Saturday Night Live sketch, "Stop Spending Money You Don't Have."

 

It is very true. If I had checked my bank balance, and done a tallying up of my fees before! I had made that last transaction, I wouldn't have overdrawn my account!

 

This is where my childish tendencies play up. I am like a kid in a candy store; when I get money, it's burning a hole in my pocket, I gotta spend it. That's exactly where I had gone wrong.

 

Those last two transactions didn't need to be made. I could have $50 right now, instead of negative $3.

[tman666]

You could try paying for some things in cash... This will have the effect of you visually seeing the $40 dollars being paid to someone else (for example) rather than swiping a credit card/debit card and then forgetting about it.

 

You still want to maintain a credit card that you pay off monthly (and on time) to establish credit history (just like it's good to have utilities in your name, have a car loan that you pay on time and in full, etc.). In my opinion, stuff like groceries, utilities, gasoline, etc. should be put on a card. These are items that you are going to likely need regardless, so there's no point risking being the guy in the checkout line a couple of dollars short on his grocery bill. "Luxury" expenditures such as liquor, going out to eat in a restaurant, retail items, etc. are better candidates for cash-only transactions.

 

The other thing you might want to do is set up a budget spreadsheet that you maintain on a daily or weekly basis. This can be a pain in the neck (I still haven't gotten into the full habit yet), but it's a good way to visualize and categorize what you *need* to spend your money on vs. discretionary spending (rent, groceries, utilities, gym membership, etc., vs. booze, restaurants, movies, TV, internet, ebay, what-have-you).

 

Another philosophy that helps me manage my funds is to "pay yourself first". This means that if you have any sort of long term accounts (HSA, IRA, 401k, etc.), loans, rent/mortgage, savings plan, etc. try to set it up so that your the money goes directly from your paycheck into those accounts without you having a chance to spend it first.

 

I'm still in the beginning stages of figuring this **** out myself, so I'd love to hear other suggestions from others as well.

[Ross MwcFan]

I'm 35 and I don't even know what balancing a checkbook means.

[norajane]

Well, first, you have to decide this is a priority in your life. Unless you believe that, you won't follow through on anything. Managing your money well should be a priority in everyone's life, because you can never escape the need for financial well-being.

 

A lot of people make budgets so they are acutely aware of how much they have to spend, where the money NEEDS to go, and what is left over for discretionary spending (the sh*t you don't need, but want). Keep it simple...in one column, write down all your sources of income and how much that totals. In another column, write down your required monthly expenses, like student loans, utility bills, car payments, etc., and include things like car insurance (which you might only pay twice a year) and prorate it for the month. Total that up.

 

That should give you a picture of how much money you NEED in order to just exist. Compare it to what you make in a month, after taxes are taken out. How much is left over? That's your discretionary spending. If that's $3 a month, then all you get to buy is a lottery ticket until you find a way to make more money, or you will go into debt. Or, save that $3 a month until it is $30 and buy something you want with that. Or keep saving it.

 

With debt, the rule is to pay of your high interest loans first. That is usually credit cards. Those interest rates are killer, and they compound...you pay interest on the interest that gets added to your bill every month that you don't pay it in full. If you only pay the minimum on your credit card each month, that thing you bought for $30 on credit, will cost you twice as much or more by the time you pay it off. Always pay off your credit card debt first, and then pay your cards off monthly. This, more than anything, will improve your financial future your entire life.

 

Look at your history of credit card charges. What are you spending money on? How much of that do you even remember or use? Do you even still have the stuff you bought? You'll be shocked at how much you spend on crap that you don't need or care about, but might have been an impulse purchase.

 

Look at your history of ATM withdrawals. Those really add up, and most of the time, you have no idea what you took the money out for, not to mention how the ATM feels also add up. Add it up. Take a good hard look at your habits...are you running to the ATM at one in the morning all the time to get cash for more beer? Maybe change your habits and leave the ATM card at home so you don't impulsively take money out.

 

Saving is important, and they do say to set aside some money each month for saving, even if it is just $10 a month. You will always want to have savings for emergencies, like car repairs and other unexpected things. Certainly do that, but pay the credit cards off first. 20% interest on your balances is no joke.

 

There is a lot more to learn, but start with these basics.

 

Like I said, though, you have to decide this is a priority, and then constantly pay attention to how much you have to spend before you spend it.

[norajane]

I'm 35 and I don't even know what balancing a checkbook means.

 

What are you waiting for?

 

Assuming you have a checkbook, there is something called a "check register" that came along with your checks. It's the booklet thing that fits into your checkbook, and that has all the blank rows for you to write down every check you write or ATM withdrawal or deposit, plus any automatic withdrawal transactions. It's a running total of how much you have in your account.

 

A lot of people rely on online banking these days, so just check how much they have in their account online. The problem with that is you might miss something...like a check you wrote a couple days ago that hasn't cleared yet, so you think you have more in your account than you do...and so you spend more and then get hit with overdraft charges.