We all watched in horror and morbid fascination as the markets crashed and the foreclosures started piling up. People had borrowed more than they could pay back, never once dreaming the payments would jump to something well outside their means. Credit card debt is out of control and loan default rates are through the roof.
The hope now is that this wild and devastating spiral has taught us some very valuable lessons that will keep us from experiencing the same financial trauma in the future. If you are not comfortable with your own or even your child’s view of the value of money or borrowing versus saving then there are a few simple steps you can take to get them- and yourself- on the right track to financial responsibility.
It’s surprisingly easy to lose track of your day to day spending, especially with the ease and convenience of debt or credit cards. A specialty coffee, a couple of small impulse purchases and maybe a couple of snacks through the day, and suddenly you’ve spent $40 or $50 without ever meaning to. Instead, withdraw a predetermined amount of cash for each week and when it’s gone, it’s gone. Jotting down all of those seemingly insignificant purchases through your normal day can also be helpful as it lets you see how quickly those small purchases add up.
Evaluate need versus desire
There are a lot of things that we have gotten so accustomed to that we consider them a need rather than a simple desire. Are 47 channels on TV really a need? What about the magazine subscription that you flip through randomly once a month? Do you have to have bottled water or would a jug with a good filter that you can fill up from the tap be fine? Determining what you really need versus what you simply want can help you to sacrifice those things that aren’t really necessary.
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Understand what your finances actually are.
Having a clear picture of what amount of money you take in on a monthly basis and comparing it with your fixed monthly bills will help you determine where to put the excess if there is any. Cutting out thoughtless spending can mean double payments on loans or credit cards and massive savings in interest.
Until you honestly know what your income and your expenses are, you cannot stay on top of your spending or saving.
Not everyone has a finance degree or even an aptitude for accounting, so looking into some financial education can only benefit you and your financial future. With everything from short duration certification courses on the basics to the convenience of an online accounting degree, your educational options are almost limitless.
No matter what steps you take to clean up or to maintain your financial health, the fact that you are taking any at all means that you are ready to become, and to stay, in the black.