A few simple things I’ve learned about managing money without too much fuss, a.k.a trying to put my degree to use. ** Disclaimer: There is no one-size fits all financial advice. If you need specific guidance, seek the help of a financial professional.
- Know how much you make (on a weekly and monthly basis): If you work hourly, on commission, or in the service industry, chances are your income varies each paycheck. Start keeping track of how much you make weekly, every two weeks, and monthly. This will allow you to be able to properly budget ( tip #2!). Even if you feel like you’re not making what you’d like, it’s still important to understand your finances. These years lay the foundation for your financial future.
- Make a realistic budget-and stick to it: Once you know what your income is you can create a budget. The word “budget” can be daunting so think of it as an outline. Start with the big stuff; rent, car payment, loans, etc. but don’t forget to include the other stuff. If you know that you go out every Saturday night, include it . It’s not realistic to think that you’re going to go out with your friends, so include it in your financial outline.
- Keep track of your actual spending: Along with keeping a budget, track your spending. I organize receipts in a folder, and then keep a log in my planner. If that seems like too much, use the “notes” app on your phone to log spending. There are also several budgeting apps available. I have not personally tried any of them but am planning on trying one in the future ( look out for a review soon!).
- Start a habit of saving: I talk to a lot of people my age that think savings doesn’t apply to them until they have a “real” income. Even if you’re serving up coffees or selling jeans at the mall, it’s still important to put some away. Start with 5%, then 10%, and eventually you can save more. You never know what might happen or come up, so having an “oh shit” fund can be super useful. That said, part of what you save should be off-limits and out of reach(not all of it-I’ll get to that later). I’m not a huge fan of savings account that allow you to easily transfer to your checking, it’s too tempting when there’s a good sale or you need that outfit. Try a savings account at a different bank or cash stored away. Getting in the habit now will make it so much easier in the future.
- Get to know your credit score and how it works: If you don’t know your score, check it. There are plenty of sites that allow you to check and analyze your score. You can check your credit report for free at annualcreditreport.com, it won’t give you a number score but it will give you an overview. I use Credit Karma and a tracker provided through one of my credit cards. There are three major credit rating bureaus, so your score may vary some between them. Once you know your score you can start to understand what affects it. As a general rule, you want to keep the ratio of what you’ve borrowed to the amount available to you, low. So, if you plan on using $200 a month on credit, it may be better to have two cards, and spend $100 on each. If you haven’t started building credit yet and feel that you’re responsible enough, try a card with a good introductory rate. There are many cards available that will have a low or 0% rate for the first 6 months or a year, pay your balance completely by then and your on your way to efficiently boosting your score. A note with credit cards: Use them wisely, always make your payments on time, pay more than the minimum whenever possible, understand the terms and penalties ( read the fine print!). Also know that it may hurt your score to cancel an unused card, remember the ratios. If you’re temped to use a card you shouldn’t, wrap it in a ziploc bag and then fill another with water and freeze it.
- Understand how lending works: Unless you majored in finance in college you probably didn’t learn in school how a loan works. Which seems a little crazy since we will likely all engage in one at some point. Luckily, there are plenty of great (and free!) resources online to teach you the basics. I love investopedia.com and referenced it constantly in school. Thinking of buying a house one day? Get to know how a mortgage works and the different types available.
- Set goals for yourself: I think many of us have lots long-term goals for ourselves; a shiny new car, a nice home, 3-week vacations in Europe, and while those are important to have, short-term goals are what keep us motivated in between. What do you love to do? Make a portion of your savings go toward what you love to do. For me, it’s travel. Having a trip planned that I’m working towards makes saving a portion of my check every week easier.
- Keep a positive mind: Managing finances can be super stressful if you let it, but it doesn’t have to be-it’s all about your outlook and how you prioritize. Some of the happiest people I know make very little money, it’s all about being organized. Be mindful with your purchasing, breathe, eat your greens, meditate frequently, and don’t spend your whole paycheck.
The Southern Living Latina
P.S. Look out for more tips on staying organized in 2016!