MollysBrother.com

Debt, Spending, and Saving

This blog was established for those who are stumbling into the world of personal finance. I know this is a common discovery for men and women in their 20s, but it’s also a common experience for men and women in their 30s, 40s, 50s, and 60s. In each decade of life, the rug can be pulled out from under you, causing your expected standard of living to decrease rapidly. Credit card payments pile up. Car loans and house payments are still due. Create measures in your life now that will help you avoid any major crisis down the road.

Evaluate Your Relationship with Your Debt

Unless you’re independently wealthy or highly disciplined, I think carrying some level of debt is a way of life in 21st Century America. Some of us are bogged down with credit card debt, car payments, mortgages, home equity loans. Figure out how you can eliminate the bad debt (credit cards, car payments). For those of us who don’t make six figures, these bad debts stand between us and financial stability. They also stand in our way of being able to secure good debt in our life (i.e. house payments). Look at debt in your life and work hard to eliminate bad debt. It will free up extra money that you can put towards a down payment on a house or your retirement.

Evaluate Your Relationship with Your Spending

If you don’t know where your money is going on a daily basis, then you don’t know how to tweak your budget to eliminate areas of binge spending. I am a huge proponent of tracking your spending. This isn’t something you need to do for the rest of your life. But try it out for 30-45 days. Once you’ve tracked your spending long enough, you’ll be able to establish a pattern of behavior. This will allow you to eliminate unnecessary spending on unnecessary items (like those daily cups of coffee or that pack of cigarettes).

Evaluate Your Relationship with Your Savings

Now that you’ve been able to look at the bad debt in your life and now that you’ve been tracking your spending, you’ll be amazed at how easy it is to find those few extra dollars each week to throw towards your emergency fund. (A fully funded emergency fund should cover about three to six months of living expenses.) An emergency fund should then replace your credit card to cover you in case of any emergency you might face. Once you’ve reached your goal for your emergency fund, you should continue this habit of putting money away by branching out and putting money into other retirement and savings accounts.

By evaluating your relationship with each of these areas, only then will you truly understand where your money is going on a monthly basis. Realizing this will give you greater control over your money and–ultimately–your life!