Spring into Financial Readiness!

Spring into Financial Readiness!

Lindsay Starr Platt – Correspondent

 

Unless you live completely off-the-grid, money is what makes the world go around and you need to be ready. Whether you are a minimalist or a materialist, make six-figures or are barely rubbing two nickels together, we all need to make a plan for our money. Earning, spending, saving and credit are the foundation of all financial decisions.

 

Earning money by working is the way most people obtain money and it can never start too early. Even small children can learn how to do chores, odd jobs or sell goods to earn money.  When young children earn money it teaches them that money is part sweat equity and the smarter they work the more they can earn. We all soon learn that if our money is running short, we need to earn more or spend less.

 

Spending money is often the quickest turn-around to our earnings. Paying bills can be the biggest expenditure of our funds. Most bills are often necessary, though sometimes steps can be taken to reduce bills or average the amount paid in a time period. Earnings not spent on bills are often referred to as discretionary spending, this is the money we spend to make life more enjoyable and rewarding. Discretionary spending is also the easiest way to go over budget or get into credit problems.

 

Many of us can remember always being told, “Save your money”. Saving money is like paying yourself.  The ideal amount of money to save is 20% of your earnings. Money that is saved can be saved indefinitely or used for emergencies. Often times an emergency can wipe out all your savings, but if you were disciplined enough to save it the first time, you can do it again and maybe even more earnestly than before.

 

The rule of thumb for basic money management is 50/30/20. Whereas 50% of earnings go to necessities, 30% is used for discretionary spending and 20% is for savings.

Another caveat of spending is credit. Credit is borrowing money and paying it back in a timely manner. Paying credit promptly can improve your credit score.  Credit can be obtained as a loan from your financial institution, a line of credit from a store, or a credit card. Beware of predatory creditors that seem to loan more money than you think you could pay back. If the line of credit or loan seems to good to be true, it probably is and you will be stuck with a high-interest rate and more to pay back than you will earn.

 

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