Skinnygirl Solutions: Money Management
It doesn’t matter how much money you have. If you have a job and you have an income, you have to start managing your money so you know exactly where it’s going. I don’t expect you to write down every penny you spend. With credit cards and online payments, that gets too complicated. However, there are some very smart ways to keep track of how much is coming in and how much is going out.
Make a budget. I never did this when I really needed to do it. Now that I have more money, I do it because I realize the value of a dollar more than I ever did before. A budget doesn’t have to be annoying or complicated. It’s just a very basic list of how much you bring in each month, what you absolutely have to pay, and what expenses are discretionary, like shopping or even food (you need food, but how much you spend on it can vary greatly). At least have a rough idea of how much you have free for spending after your basic obligations are paid, so you never get too far in the hole. It can help you see where you should be cutting back.
Use financial accounting software. You don’t have to be a computer person to use financial account software. Set yourself up with something like QuickBooks (for business) or Quicken (For personal) and just start keeping track. You can sync many programs with your bank account so your bank statement is downloaded each month. Once a month, go through and verify that everything looks correct. Then you can generate reports to see where your money is going and design budgets to help you shift your spending. Nothing gives you a reality check like a good pie chart to show you exactly how much you’ve been spending on mochas.
Keep your receipts. Put personal receipts and receipts related to your business in separate files, organized by month. When you use your accounting software and you’re trying to figure out what a charge was, you’ll be able to look. You might need those receipts come tax time if they are deductions, but even if they aren’t, keeping close track of where your money goes will help you realize when you’re spending too much on something stupid.
Pay off your credit cards. Credit is confusing. Let me give you a mini lesson right now. Let’s say you carry a balance of $5,000 on a credit card, at an interest rate of 18%. If your minimum payment is $125, and you only make the minimum payment every month without ever charging anything else on that card, it will take you almost twenty-three years to pay off that five grand, and you will end up paying $6,923.14 in interest. Stupid, right?
Some people think credit is the “American way,” but there is nothing American about throwing away the money you worked so hard to get. Just stop using it, if you possibly can. Pay down your cards by making the largest payments you can, even before you save, because credit is costing you a lot more than you will earn in interest in any savings account. Make this priority, and wise up. Once your credit card is paid off, never carry a balance again.
This is an excerpt from “Skinnygirl Solutions” by Bethenny Frankel, available on Amazon.com.