As you know, one of my goals is to get into better shape, and not just physically but financially too.
Financial wellness can mean different things to each of us, but we all appreciate a sense of control. Do you know how much you are spending each month? On food? On clothes? On vacations?
Thanks to credit cards it is really hard to know. So this is my first task – to gain a sense of financial control.
- Get Organized – Thankfully to technology these days you don’t have to sit with your calculator and be friendly with it. Sites like Learnvest and Mint can help you better understand your spending habits by categorizing your purchases, complete with pretty little graphs. I prefer Learnvest over Mint but you can try both and see which one fits you better.
- Create a Budget to Track Your Finances – Use the information from Learnvest or Mint to create a budget. You now got a better sense of your spending habits, this should be the basis of your financial plan. Set limits that reflect your previous behavior (this can get a bit tricky, as you need to start with reasonable expectations). For an example, if in December you spent $200 on Starbucks, try to not promise yourself to go cold turkey, but to limit your intake on Starbucks to a few times a week and make coffee at home (which is easy these days since the creation of the Keurig to make single cups quickly).
- Make a Savings Plan – There should be some room between your income and your expenses. Make a savings plan starting with the questions of: How much do you need to save? If you are in your early 20’s you need to save at least $30/week towards your IRA or 401k and if you are older and just starting your IRA or 401k you will need to be more aggressive at putting money away for retirement. When it comes to vacation how much is to much? And so on…
As I continue to work on my financial goals I will give your more insight to each of these.