Each time you end up trying to find a funding loan for some purchase you wanted or to pay off some debt, you probably think to yourself, “I am going to learn to manage my money the right way!” Of course, life probably got in the way in the past, and it might still. Maybe you just do not have the time for the money management class you planned to take.
What if I could synthesize the steps you need to take into a Top 10 list? Everybody likes a Top 10 list.
You simply follow each step in order and voila! Your money situation improves, and you learn to better manage your funds. As the old saying often gets misquoted, let us be honest. Money is not the root of all evil. Love and worship of money are the roots of all evil.
Money is not the root of all evil. Love and worship of money are the roots of all evil
Fact: you need money to survive and thrive. You should owe no debts. You need a savings account and a checking account. You should also own investments. This lets you lead a stable life knowing that you can pay for housing, utilities, groceries, etc. You can purchase new clothes when the weather changes or you wear existing items a bit thin.
Follow this list of ten essential money moves in order and you will learn the basics of good money management. You can become one of the individuals that do not worry about how to cover a $1,000 financial crisis like two-thirds of Americans does. This list assumes that you already work. You have a job or run a business. If you don’t already have employment, you find a job first. Once you obtain employment, you make these ten moves in order. Let’s do this.
- 1. Open your bank accounts. Yep, plural. You open a checking account and a savings account immediately. Set up an automatic deposit for your paycheck into your checking account. Set up an automatic deposit or transfer from your checking account to your savings account in the amount of ten percent at a minimum. You will create a hard line item in your monthly budget for this. If you haven’t amassed the funds required to open a bank account (a common thing in many countries), open a PayPal account. You need somewhere you can have funds deposited, so you do not keep everything as cash which you could easily misspend or could get stolen. Saving money saves you from ever needing fast personal loans for bad credit.
- 2. Make a budget and stick to it. Many people write down their budget but ignore it. Sometimes they make “exceptions” to it for some item that they really want. These first two steps of setting up accounts and a budget form the foundation of everything. You force yourself to honestly appraise your own financial situation in writing. List all your sources of income – pay, money from an extra job, dividends from stocks your grandma bought you, etc. List all of your bills. Also, list the dates you get each. If your payday comes two days after the electricity bill comes due, you need to save back money from the prior paycheck to pay that. If you make your lists and find that you earn less than you spend, you need to reduce spending or get another (second) job. This leads us to point number three.
- 3. Pay for everything on time or early. You may not want to part with the money, but you need to pay on time. If you rent from a corporate apartment complex, they probably report to a credit bureau. Some utilities report to credit bureaus and all financial lending institutions and credit cards report to them. When you pay late, you hurt your own credit score.
- 4. Pay down and close your credit cards. Pay off your loans. Of course, you want good credit, but you might wonder why you want good credit if you close your credit cards and pay the loans off. Well, for one thing, you need to pay them to show other lenders you would make a good investment in the future. Paying off that student loan helps you later get a mortgage. You also need a good or great credit score because many employers run a credit check as a part of their background check during the hiring process. If you want a good job, you need to pay your bills on time, so you earn a good credit score.
- 5. Stay on top of handling finances with a money management app that includes a spending tracker. This lets you reinforce your good spending habits. You check it at the end of each day to see what you spent and how well you’re maintaining your budget. The five minutes you spend looking at your spending helps you stay on top of things and using the tracker automates what could be a tedious process.
- 6. Set financial goals. Make a short-term goals, medium-, and long-range goal. Start with just one of each. You need to know where you want to go financially to get there. Setting goals helps you map your journey to reach them. If you just started your first job and have yet to move out of your parents’ home, you might start with building a savings account. Make a goal of $100 by the end of your first month of employment in savings. This lets you still pay any car loan or other expenses while you amass the deposit, plus the first and last month’s rent you will require to move out of your parents’ house. Your medium-range goal might be to open an investment account, while your long-range goal could be buying a house. You decide and research how much your desired goal costs, then you divide that amount by the number of months required to save that much to figure out how much you need to save each month to achieve your goals.
- 7. Open an investment account once you pay off your loans and credit cards. You get to re-direct the money you were giving to a company earning interest from you to the most important interest you should have – your own awesome future. Now that you paid those loans off, you give yourself the money every month and put it into investments that grow faster than your bank account can. Even high-yield savings accounts earn about two percent interest, but by buying stocks or cryptocurrency, you can earn a greater percentage of return. You need to know what you’re doing, but you can start an investment account with Charles Shwab easily as long as you already have a checking account and a savings account.
- 8. Open a retirement fund. This works a lot like a savings account, but some tie it to an index that typically earns interest in the double digits. These aren’t guaranteed, but by shopping savvily, you can find an account that grows dependably, such as those offered by TIAA-CREF or Vanguard. Set up an automated deposit for this that occurs monthly or weekly. Contribute a portion of each paycheck to this account.
- 9. Examine your credit score and credit report to make sure it accurately reflects your finances and payments. You need to report any incorrect information immediately to the credit bureau so they can correct it. This can increase your score.
- 10. Find your philanthropy and start donating part of your monthly income to help others. You might make loans to fledgling or developing businesses, such as those on Kiva. Perhaps your church, synagogue, or temple has a food bank, soup kitchen, clothing closet, etc. Maybe you begin donating to an organization that helps educate youth like Girls Who Code. Giving back helps another person move out of the situation in which you used to live and build their own stable financial future. You know they want to make a better tomorrow for themselves by their involvement in the organization you choose, so donate each month. Religious organizations call this a tithe and suggest ten percent. You do not have to wait until you have tons of money to start doing this. (Read the story of the widow’s mite and you will understand this.)
That’s it. In ten easy steps, you go from out of control finances to helping others get out of the same type of situation. They might sound like obstacles read all at once, but start with step one and check each off as you go. It does not take long to build wealth once you start working, as long as you pay off any debt first. Once you live off of only what you make and you save money in the bank, investments, and a retirement fund, you amass money much quicker, especially if you work a side gig, too.