Start Today! – Financial Literacy Month

If you haven’t already, today is the day to take charge of your finances. It is easy to hide from financial problems, and it is much harder to own up to them and take the steps to make changes, but even though it might be easier it is not healthier. Hiding away from problems can negatively impact your performance at work, and can lead to emotional and physical health problems.

There are a variety of resources available that can help you get started on your road to financial success, and you don’t have to wait until another Financial Literacy Month to get them. Be sure to visit learnkey.com/financiallitmonth for your free white papers, and our Financial Literacy Month blog archive, featuring all 20 financial literacy tips.

Share Responsibility – Financial Literacy Spending Series

If you are single, you must take responsibility for your spending habits. You have to come to terms with the fact that you got yourself where you are because of the spending decisions you have made, and you are the only one who can make the decision to change.

If you are in a relationship, however, you need to share both the responsibility of where you are financially and the responsibility of making changes. It is easy in relationships to play the blame game, but you shouldn’t, especially when it comes to money. This is not the time to pit yourselves against one another and see who wins, that will only lead to more problems. You are both in the relationship, and are equally responsible for where you are financially.

The next part, is that you need to share responsibility for the changes that you need to make. You should work together to create the spending plan. Each person should track their own spending, and each month you should sit down and make decisions together about where adjustments need to be made.

Be sure to visit learnkey.com/financiallitmonth for your free Financial Literacy white papers and other resources, and you can also Like Us on Facebook and Follow Us on Twitter for more daily Financial Literacy tips

Make Spending Plan Adjustments – Financial Literacy Spending Series

Another very important aspect of your spending plan is to make adjustments where needed. This is where the wiggle room comes in, you can see how the month goes and then make changes to your spending plan accordingly. If you have an emergency and get a flat tire that has to be replaced you can work around that. With a spending plan instead of a budget, you adjust and then keep moving forward.

Life is constantly changing and things are coming at us all the time, it is important to stay flexible and head in the right direction.

Record ALL Expenses – Financial Literacy Spending Series

One very important step toward financial literacy and success with your spending plan is to track all of your expenses. Being able to visualize your spending allows you to use this information to make future purchasing decisions.

Track all of your expenses for a full month, and make sure that everyone in the family participates in this process; it has to be accurate for it to work. This means that you even have to fess up to the $1.00 a day you use in the vending machine for your afternoon candy bar. Even cash transactions count! Once you have this all added up, you will know where you stand every month because you will have the accurate amount that you spend.

Once this is completed, you need to get the amount that you earn each month. Then you will look at these numbers and see where each of these expenses figure in. After doing this, you will be able to see areas where you can save, and where you can apply extra money, such as paying off debt or toward your savings accounts.

Track Your Spending, Don’t Budget – Financial Literacy Spending Series

This might sound different than the advice you are used to getting about your finances, but there is some sound reasoning behind it. Budgets don’t work because they are static and do not account for life and the unexpected costs you will encounter. Instead track your spending and create a spending plan.

Think of this like tracking your calories in a food journal versus dieting. Dieting is hard and often times results in failure because you are being restricted, feel like you are missing out, and are being deprived. A food journal on the other hand lets you analyze the calories you have consumed and burned so that you know where you need to make adjustments and you can control your eating. A spending plan is the same concept.

To get started

Plan how you will spend your money
Track your spending
Compare your plan to reality
Make adjustments and decisions about your goals monthly.

Spending plans allow for wiggle room so that if you take a small detour off your path you won’t feel completely defeated and give up. Instead you can look at the numbers, adjust and get back on course.

Spending Decisions – Financial Literacy Spending Series

So all week we have been focusing on savings, and to cap off the week I have a post about spending. Know that every time you make a purchase, you are making a spending decision. You have a choice and you decide what to spend your money on.

There are three questions you should use to guide you through the decision making process each time you make a purchase; Utility – is this something I need or something I want? Availability – do I have the money to buy this right now? Affordability – Does this fit into my long-term goals?

These questions are great guidance and cause you to really stop and think about the decision you are making. When I was younger, I never really thought about spending money and how it affected my future, I just did it. As I have gotten older and the reality of life has set in, I have realized that I need to be more thoughtful about what my actions today will mean for my future.

Here are some tips that might help you make spending decisions:

If you are shopping, walk around the store with the item in your hand and ask yourself the questions, 9 times out of 10 you will probably find a reason why you don’t have to have it.
When making a big purchase decision, sleep on it. Think about it and don’t be impulsive.
Ask for advice from friends and family they might have a perspective you haven’t thought of.
Really think about the long-term to give you perspective.

Hands Off The Long-Term Savings – Financial Literacy Saving Series

If you are able to you should be putting aside money into savings. You should ideally be putting 60% of your total savings into a long-term savings account. This is used for your long-term goals like retirement.

In the book, Money: What Financial “Experts” Will Never Tell You, it talks about the prediction that in 2015, 77 million Americans will be over the age of 50 and only about 1/3 of those people will be financially secure enough to retire. That means 50 million of these individuals will not be able to retire. Have you started saving for your future, yet?

To be successful at saving for future goals it is important to make sure that the money is not easily accessible, this will cut down the temptation to pull money from this savings account and spend it. It would be a good idea to put money in an account like a 401(k) or Roth IRA.

Emergency Savings – Financial Literacy Saving Series

Building on the last two posts (found here and here), todays blog post is about emergency savings. It is important to set aside a percentage of your savings each month, ideally you should put aside 20% of your total savings toward your emergency fund. An emergency can have lasting damaging effects on you financially if you are caught unprepared.

Emergency saving funds are very important, you never know what life will throw at you so it helps to be prepared. Any number of things can happen from illness, divorce, loss of job, or a car accident so it is important to be financially ready for it. In the book Money: What Financial “Experts” Will Never Tell You, the authors suggest thinking about this emergency savings as self insurance. You insure your car and your house so you should have emergency savings set aside for insurance when something unexpected happens.

It is suggested that you have 3-6 months of income set aside and if you can it is ideal to set aside one year of net income. This is you backup so that if something does happen you can weather it and continue to build your long-term savings. Without an emergency savings many people will use their retirement accounts to pay for unexpected emergencies and this can derail you from your long-term goals.

Divide Your Savings Into Three Categories – Financial Literacy Saving Series

If you haven’t already, read our previous post Paying Yourself First

So now that we are all saving 10% of our income each month we need to break it down into three categories. You should put aside 20% of your savings each month into an emergency savings fund. An additional 20% should be put into an account for emotional spending and 60% should go toward your long-term savings goals.

Continue reading “Divide Your Savings Into Three Categories – Financial Literacy Saving Series”

Pay Yourself First – Financial Literacy Saving Series

Pay Yourself First, I like the sound of that, but apparently in America we find this hard to do. Now, when I say “pay yourself first” I don’t mean go out and buy anything you want and then worry about paying your bills. I mean pay your savings accounts first before you pay your bills. The logic is that if you put your money into savings first you will actually put money in savings.

Continue reading “Pay Yourself First – Financial Literacy Saving Series”