Welcome back to Bagging it on a Budget 101. OK, I’m facetious, but I want to share some serious tips with you lovely peeps. How can we set ourselves up to financially secure when we are distracted by life and shiny, new things? It’s not easy, but if you’re savvy, it’s possible. I am not suggesting by any means a total withdrawal from society and socializing with friends, but we all need to start making wiser decisions NOW, so we have that slush fund and savings LATER. Finances can be confusing, and our exposure can be limited. Let’s talk about how to spend smart and save wisely, so today, a quick lesson in dos and don’ts. I promise to keep it interesting.
So here’s how it goes: we all need to save money now, to have a successful financial future. And it’s never too late folks. Let’s begin with that dream of the perfect home.
- Rent. Many people, especially 20-30 somethings and the over 50 empty nesters, are renters. They dream of the perfect house, all decorated, a show stopper with prized roses, a picket fence and the gourmet top of the line outdoor kitchen to entertain friends all the time. The house is a great dream, and if you are successful and choose the “right” career path, possible. But for most people, they are sagging under the weight of a too big mortgage or too expensive rent. No need to keep up with the Joneses peeps. Financial experts recommend that your monthly payment to your mortgage or bank be no more than 30% of your income. So that luxurious condo on the ocean may need a rethink. Alexa Von Tobel, CEO of LearnVest (refer to my first article here folks) suggests the following to keep yourself from drowning. It’s called the “50,20,30 Rule,” and here’s how it plays out. 50% of your income for necessities (stay real here folks, a week in Belize is NOT a necessity), 20% for savings (your future may depend upon it), and 30% for all that fun stuff to occupy your free, leisure time.
- Credit Cards. This a touchy subject, so I’ll try and tread lightly. I know we all need to build our credit, and the plastic is an excellent way to do so. But beware. If you are spending more than you can pay off at the end of each billing cycle, you are in trouble. It’s a surefire way to start that whirlpool of debt. It may have been fun to live on pasta and peanut butter in a cramped housing share back in the day, but as a thriving, functioning adult, it doesn’t quite work, especially if you’re married with kids. I’m not saying to forgo your cards, but if your billfold unrolls like a loo roll, you’ve got issues. Look for cards that offer rewards you can use, and please, please, please – don’t spend more than you can consistently pay off. The interest will kill your savings and put unnecessary pressure on you.
- Insurance. YES, you NEED this! We all think we’re invincible, but you never know what can sneak up on you. I have seen incredibly healthy people drop in a heartbeat. Had my hubby not had insurance when his heart decided to conk out, well, we’d be living in a box on the corner about now. Thankfully, we were insured, he got better, and the world stayed pretty much the same for us with a few added expenses to work into our new budget. But it levels out, I promise. Understand that none of us is invincible. You don’t want to learn the hard way, by being sucked into the pits of debt and despair for paying the ambulance, ER, CCU fees. Maybe you’re being sued by the other driver you rear ended (I know, not your fault) or you need to replace your life’s possessions after a robbery. Trust me; you need insurance.
- Emergency Fund. My mom always told me to be sure to have at least six months saved in the bank for rainy days. As a teen I used envelopes in my sock drawer to keep myself flush, I mean, what if those babysitting jobs stopped? How would I go out with friends, buy music or put gas in my car, etc.? Strange things can happen, and it’s best to be a good scout and be prepared.
- Your future. Don’t neglect this, my friends. I too am guilty, and harbor that “live forever” BS in my mind, but in truth, we all get older, a little obsolete, and retirement becomes inevitable. How you spend your golden years depends on how you save during those salad days. IRA, annuity, bonds, something other than a little piggy bank crying for spare change. You’ll need it. It’s all about the planning, so now is a good time if you haven’t started preparing yet. An advisor at your favorite bank branch can most likely start guiding you towards the best savings for you and your future. A sound financial plan will maximize your current income, and help you invest in your future and avoid unnecessary taxes. So what are you waiting for?
Creating a solid financial foundation is not easy, but with diligence and perseverance, you can be prepared, and flush. How about another challenge? Let’s make this weekly. For the next month, try and save just $5.00 a week. That’s $260 at the end of the year. It’s small, but not a scary start. You can also add your leftover pocket change, or make it a family game. Decorate a jar and earmark it for something special. Or, take your end sum, invest in your future. You already know how. It’s all about having a little restraint and a lot of patience, but I have faith in you peeps. You CAN do this!
Stay motivated and caffeinated!😉☕