Sara Weiser – PSECU
What does financial freedom mean for you? For many people, it means making their money work for them so they have resources available on hand when they need them. Whether you live alone or have a family, a money management plan ensures you stay on track financially and use your resources to their fullest.
A good money management plan gives you security and helps to make sure nothing slips through the cracks. It keeps you moving toward your financial goals, both big and small.
Step 1: Review Your Spending Habits
- Review your credit score.
- Calculate earnings after tax and deductions.
- Look over your account statements from the past 60-90 days.
- Based on your spending habits, write down the costs of your monthly needs and wants in separate columns.
Step 2: Create a Spending Plan
- Live below your means.
- Set goals based on your monthly income and spending.
- Earnings – Spending = Savings
- Savings x Time = Financial Security
Step 3: Pay off Debt and Build Up Savings
- Save for an emergency fund that could cover 3-6 months of your living expenses
- Reduce debt by paying off the loans with the highest interest rates first.
- Only make purchases with your credit card that you can pay off in full.
- Save at least 10 percent of your income in a retirement fund.
Step 4: Watch Out for Money Leaks
- Keep records of what you actually spend each month in a way that works for you.
- Track expenses and consult a tax advisor about what receipts you should keep for tax purposes.
- Stop unused subscriptions, cut back on unnecessary purchases, and avoid impulse buying.
- Avoid late fees or overdraft fees by paying immediately or setting up automatic payments and an overdraft transfer service.
Step 5: Let Your Money Work for You
- Take advantage of free money (such as tax-deferred, contribution matched, employer-provided retirement accounts).
- Talk with a financial advisor about investment options.
Step 6: Evaluate
- Do an annual finance check-up: update your insurance plans, check your credit, investigate refinancing your loans, and adjust your budget.
- Creating a budget is not hard, but it does take self-control to adhere to your savings and spending plans.
The content provided in this article is for informational purposes only. Nothing stated is to be construed as financial or legal advice. PSECU recommends that you seek the advice of a qualified financial, tax, legal or other professional, if you have questions.