Sharp Around The Edges

In recent weeks, I have rekindled my obsession with money. I love money. I have never had a problem of having too much money (but I’m open to trying it) but definitely have been poor. I have been awarded a FINRA/ AFCPE Military Spouse Fellowship which has afforded me lots of time and motivation to refresh my skills.

I got back to the books. Then I got embarrassed. Then I got mad. Now I am taking action and sharing what actions I’m taking and what I’m learning with you. First I read Living Rich for Less: Create the Lifestyle You Want by Giving, Saving, and Spending Smart then I read The Total Money Makeover: A Proven Plan for Financial Fitness. Then I invested the time to draw my personal financial map.

Book reviews later, but if you, like me, are really fed up with your financial situation, here are 10 things you can do this week to right the ship and re-draw your map.

1. Balance your checkbook. I know this is a boring job. Maybe you don’t know how. Maybe you were never taught how. But matching your balance to the bank’s balance helps you identify errors (both yours and the bank’s) so you can correct them and avoid expensive bank fees for overdrafts, Non-Sufficient funds and below minimum balance fees. Drop me a note if you don’t know how. I’ll talk you through it. For real. No Charge

2. Reacquaint yourself with your account terms. What kind of accounts do you have? Does your checking account charge ATM, Per Check or Monthly Flat fees? Do you earn interest? Is there a minimum balance requirement? Over time, these things are easy to forget. Check your savings account. What’s the interest rate? When do your Certificates of Deposit Mature?

3. Read a book. There are hundreds if not thousands or hundreds of thousands of personal finance books out there. Odds are you can skim through one, two or ten at your local library or bookstore and find an author that you can relate to in terms of background, tone and overall quality of advice. The book should cover the basics of personal finance and debt management. Save the investment books for just a little bit later. Of those I’ve read, I’d recommend

The Total Money Makover

by Dave Ramsey. It’s not over long, the language is easy to understand and he takes a very common sense approach to personal financial management.. I found myself agreeing with 99% the reasons behind his advice.

4. Assess your current position. How much debt? How much savings? How is your retirement plan coming along? Where are you compared to where you had hoped you’d be at this stage of your life?

5. Write down your financial priorities. For me they are eliminating our debt (we only have three creditors but we owe them well over $100K), building an emergency fund consisting of 3-6 months living expenses, saving for retirement, paying cash for our next home and continuing to support a select few charities as generously as we can with both time and money.

6. Develop a budget. Ideally this is a zero-based budget meaning that you have planned how each and every dollar you earn will be spent. Include concrete plans to help you reach your goals from step5. For help with this, there are a number of tools online or contact me for some linky goodness and/ or templates that I have used.

7. Analyze your spending for the previous 3 months. Do this by downloading your transactions from your bank’s website and labeling each with a category (assuming you don’t use Quicken or Mint or some other tool). Calculate the totals on a monthly basis and compare to your budget. This is a test of your budget and can be an eye-opening experience. If your actual spending is too different from your plan, ask yourself why? Do you need to adjust your budget or rein in your spending? My analysis for October showed a $500+ difference between what I’d planned to spend on groceries and the actual. Discussions (thankfully not heated) helped me determine that our approach to meal planning needed to be modified. Not every night need be a gourmet meal no matter how much we like to cook because, frankly, most weeknights we just don’t have a gourmet chef in us. S/he is tired and logging in to order a pizza.

8. Take a look at your debt. Are you paying just the minimum payment on loans and credit cards? With credit cards this is a great way to never get out of debt. In general, this is how you overpay interest. Take another look at your budget and see where you can tweak it in order to pay just a little extra each month toward debt elimination. One good technique is the Debt Snowball outlined on DaveRamsey.com. Quicken also has a tool in their offline version. Again, drop me a note if you need help. Some experts like the lowest balance method, others like the highest interest rate method (me included) but the key is to pick a way and START.

9. Decide how you’ll stick to your budget. Don’t get me wrong. This takes a LOT of willpower. Just like exercise, there is a huge difference between planning to do it and actually getting it done. For us, we’re using a separate checkbook for our groceries, gas and other expenses where we have a tendency to overspend. There’s no overdraft line on it to keep us honest. Plus we’re both committed to the mission and that helps a lot.

10. Congratulate yourself. Fix a cup of tea and congratulate yourself. You have done a lot of work. You’re not done, but you’ve made a fantastic start!