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How To Avoid Making Mistakes Managing Money

The way to not make mistakes like this is to have a plan for money coming in and going out, a spending plan. And then strategies to help you follow the spending plan.

I do not tell lots of stories on the blog, but I am going to tell a little story today. And my reason for telling this story is that I believe it can help readers avoid mistakes managing money.

We All Making Mistakes Managing Money

Prior clients of mine recently made a huge, several thousand dollars mistake managing their money. Without giving you lots of details, this husband and wife will be paying for this mistake for a little while. As I discussed the issue with them, we eventually figured out what happened. What it boils down to is not managing money well, because they had no clue where they were spending it. I see this with clients often, where they are spending money and not keeping track of where they are spending it and no plan.

As a financial coach, I believe knowing where your money is going or where you are spending your money, is critical and helps people manage money better. That is what I teach my clients and others. And knowing where your money is going helps you to cut and prioritize your spending when you see fit.

The clients that I am speaking of will recover, but I tell this story to hopefully, stop others from making similar mistakes with money. The way to not make mistakes like this is to have a plan for money coming in and going out, a spending plan. And then strategies to help you follow the spending plan.

A Spending Plan Will Help You Avoid Making Mistakes Managing Money

Having a spending plan to help you manage your money is of paramount importance. With all the competing demands for your money, if you do not create a spending plan and then put that plan into practice, the competing demands will spend your money for you.

And Now What

As I said earlier, I will work with them, and they will regroup and recover. One thing is for sure, my clients are more convinced and fully persuaded that a spending plan is crucial. And then following the spending plan is also very important. What is the point in having this tool, that can start you on your path to financial freedom, and not follow it?

I am a financial coach. Contact name here. I can help you create and stick to your spending plan.

Money is Good for Three Things

My point in all of that is to say that it’s okay to spend your money. It’s your money, you earned it, and you should spend it but, you should also spend it with a plan in mind. My goal is to help you create a spending plan to help you spend your money within some parameters.

This holiday season as you, are shopping, keep in mind the three things money is good for. If I were to ask you what three things money was good for what would you say?When I am teaching how to create a winning spending plan, I always ask this question and get a lot of different answers.

Let me ask it in another way.

The things you do with money, can be put into three categories, what are they?

When I ask this question, I always get similar answers. Answers like It’s good for paying bills, buying stuff, saving, investing, and going shopping.

And then I would say something to the effect of okay, we got spending and saving. What is the third thing? I put investing into the saving category.

It’s interesting because at this point most of my students go blank. Then
I ask again and say ok money is good for three things, spending, saving,
and…? What are the three things we all do with money?

Most of the time I get no response and ask the class to think about and move forward with the class.

My point in all of that is to say that it’s okay to spend your money. It’s yours, you earned it, and you should spend it, but you should also spend it with a plan in mind. My goal is to help you create a spending plan to help you spend within some parameters.

What Are The Three Things?

Simply put, money is good for three things: spending, saving, and giving. Interestingly when we are talking money, we forget about giving. That is a discussion for another day.

I am a Financial Coach, and I would like to help you navigate your finances and create a winning spending plan for you and your family. Contact me
here, and we will do an assessment and get started improving your finances one GoldneRule at a time. Take care.

Healthy Financial Behaviors

As you can see, it makes a big difference to pay more than just the minimum due, in both the time it takes to pay off debt as well as how much you end up paying. Of course, the optimum plan would be to pay the balance in full each month and avoid paying interest altogether, but the most important thing is to make sure your payments fit with your spending plan.

Last month I posted an article titled “How Healthy is Your Financial Behavior?”. In it, I discussed healthy financial behaviors and even gave you an assignment. This month we want to talk more about healthy financial behaviors and what you can do or what healthy financial behavior you can employ to improve your financial health.

Several financial behaviors may be draining your spending plan without you even realizing it, and leaks here and there can add up to spending money on things you did not intend. Below are some financial behaviors you should consider. Changing these behaviors may help you tighten up your spending plan.

When making payments on credit cards and loans, try to pay more than the minimum. Paying more than the minimum can save you from incurring a significant amount of debt in the form of interest. Here is an example: If you have a credit card with a $1,000 balance, an 18% interest rate, and you pay only the minimum payments each month it would take almost three years to pay off the balance. The total of payments would be about $1,304, meaning $304 is interest.

On the other hand, using the same balance, interest rate, and minimum amount due, let’s say you pay more than the minimum due each month. If you were to pay an additional $60 each month, or a total of $100, it would take just 1 year to pay off the balance, and the interest paid is reduced to $103, a significant saving.

Pay your bills on time. First, late fees can add up, so consider setting up automatic payments for your monthly bills, either through the company billing you or through your bank. Some companies even offer a small discount for enrolling in automatic payments and paperless billing, so be sure to check.

Another benefit of paying bills on time is that accounts, such as loans and credit cards, are reported to the credit bureaus and are reflected in your credit score. Thirty-five percent of your credit score is based on how you pay your bills. Therefore, on-time payments will help increase or maintain your score, while late payments will lower your score.

Read the fine print and look for fees or charges for certain actions or criteria. Banks, credit cards, and loan companies will charge fees for certain transactions or services, so be sure to read your statements carefully and know the terms and conditions. Banks may charge a fee for that “free” checking account and 0% credit cards aren’t always what they seem. For example, while the idea of transferring a credit card balance from one that charges interest to an interest-free card be sure to look for balance-transfer fees or other charges that must be paid up-front, as they may outweigh the savings, you’d receive from a 0% interest offer.

Plan your shopping trips before you head to the store. Take note of what you already have and make a list of what you need. Do not shop for things you do not need. How many times have you walked into a store for one item and you end up walking out with a full cart of merchandise totaling $100, or $200? You did not go shopping for these items but once you saw them you had to have them. Did you think about how this would affect your spending plan?

Making a list beforehand, and sticking to it, will do two things. First, it will help you from going over your spending plan category. And second, it will help you from making unnecessary purchases.

These are just a few behaviors that can help you financially. Can you add any? Comment below and let me know what you think.

You Need a Fund for Emergencies

An emergency fund or what some call a contingency fund allows you to stick to a spending plan without having to change and interrupt your budget to meet unexpected costs and expenses. You can plan better and manage your finances knowing you can cover emergency expenses as they arise.

Having emergency savings is extremely important in today’s economic environment. It may be the most significant difference between those who manage to stay afloat and those who are sinking into financial debt. Emergency savings of 3 to 6 months of expenses allows you to meet unexpected financial challenges such as:

• Car repairs

• Medical expenses

• Home repairs

• Other emergency expenses

Having an emergency fund also allows you to plan to spend all your money without worrying about taking care of emergencies that arise. Below are more emergency fund tips.

Emergency Funds give you Peace of Mind

The emergency fund not only allows you to cover these expenses, but it gives you the peace of mind that you are prepared for financial emergencies.

Not having an emergency savings fund is a reason many individuals borrow money at high interest-rates through alternative and predatory lenders.

Keep Emergency Funds Where you can get to Them

You will want to keep your emergency savings in an account that you will have ease in the ability to access as needed. This is called liquidity or the funds being liquid.

How easy is it for you to get access to the money when you need them?

It is best to keep emergency savings in a bank or credit union savings account so I can get to it when I need it. These types of accounts offer easier access to your money than certificates of deposit, U.S. Savings Bonds, or mutual funds. Keeping your emergency fund separate from checking accounts makes it much less likely that you will use these savings to pay for everyday, non-emergency expenses.

Get the Family Involved in Saving for the Emergency Fund

You may think that it is not so easy to save $500 to $1000 for emergencies. One way to make it easier is to get the entire family involved in building the emergency fund. It may be easier if you involve your whole family in meeting the challenge. Explain the importance of emergency savings to your family and get them to help by cutting expenses on the power, food, entertainment, and more.

Make your emergency savings fund your family financial goal and plan how the family will meet the goal. Keep the family updated and when you meet the goal be sure to celebrate maybe with a family fun night.

Having emergency savings is essential in today’s current economic climate. Having emergency savings will give you peace of mind about your finances. Set goals and celebrate when you meet the emergency savings goal. You need an emergency fund, and with some work and a plan, you can have an emergency fund for emergency expenses and peace of mind over your finances.

Achieving Financial Success

To some, financial success is spending less than they make. This is a key to any financial plan. The alternative is spending more than you make is a recipe for disaster. Spending less than you make will allow for savings so that you can purchase assets.

Financial success is attainable for everyone because it means different things to different people. Your thought or views on financial success are probably different than mine and vice versa.

Financial success for one may be to provide an inheritance to his children, and another person may see the vacation house on the lake as financial success. However, you determine financial success, below are some tips or foundational tools to help you achieve your view of financial success.

Have a Plan

Get organized and develop a plan to get you to where you want to go. In doing that, determine what your financial situation is. Often, you can know where you are going until you know where you are. So where are you? What is your income? Who do you owe, how much do you owe, and when is the payment due? These questions are the types of information you will need to know.

Once you know where you are, you can develop a plan to develop short-term and long-term goals and ways to meet them.

Spend Less

And it is assets that will help you build your wealth and financial success.

Prepare for Expected and Unexpected Events

Expected events would include things like retirement, holidays, and kid’s college. How will you plan for these events? How much will you need for college or retirement? Prepare for these events to be successful for you and your family.

Unexpected events include car repairs, a job loss, or maybe unexpected medical expenses. How will you handle these events? An emergency fund of six to twelve months of expenses is a good place to start and could be seen by some as a financial success.

Preparing for expected and unexpected events will save a lot of headaches later.

A Healthy Credit Report

Many people see a healthy credit report as financial success. To keep your credit report healthy, you need to do two things. First, pay your bills on time.

Thirty-five percent of your credit score is based on how well you pay your bills on time.

The second thing you need to do is get a free copy of your credit report at annualcreditreport.com. Getting a copy of your free credit report, and looking over it, may alert you to possible identity fraud.

Understanding Taxes

Many people do not take advantage of tax breaks that are available to them. For example, the Internal Revenue Service conducts a program called VITA. VITA stands for Volunteer Income Tax Assistance. Volunteers are trained to do taxes for free for low and limited-income individuals and families.

Additionally, credits such as the earned income tax credit, education credits, and retirement saving contributions, can increase your income and help you reach your financial goals.

Give Back

Money is used to do three things. That is, spend or buy things, saving and investing, and giving.

So, to complete your success, give back.

Once you achieve financial success, give back to the local elementary school, food bank, or United Way. Give back to the community in some way. For me, giving in a much greater way than I am currently able, would be the ultimate success.

What constitutes success for you. Comment below, I would love to hear from you.