Financial Mini Series Part I

7 Dec

It’s hard to function in today’s world without money but what I’ve discovered in the last couple of months is that most people have no idea how to handle it. Because of that I wanted to write up a series of posts on money matters that I am familiar with. I am by no means an expert in finance, I still consider myself a beginner. Some of you might know that I am employed by a financial institution and thus am required to make it very clear that anything I write in this post or on this blog is solely my opinion. Please seek out the advise of your financial advisor if you have questions, if you are a member of USAA they offer free financial advice over the phone.

To give you a little familiarity with my financial knowledge and experience here is a quick summary. I have never carried a balance over from month to month on a credit card, I have student loan debt that gets paid on monthly, I currently rent an apartment with my husband, I am terrible at sticking to a budget, the only vehicle I’ve owned was paid for with cash but I have recently been pre-approved for an auto loan and will be purchasing a car before the end of the year, I started working in the field of finance in June via a temp agency and it has increased my desire to make smart choices and be proactive with our financial plan, and I read “Make Money, Not Excuses” by Jean Chatzky and highly recommend it.

You Can’t Spend Money You Don’t Have

To take control of your financial life you need to know what your monthly expenses look like. If you don’t know take a moment to jot down the bills you pay and any other reoccurring monthly expenses, including gas and groceries.

If your cash flow in is equal to or less than your cash flow out you likely have run into money problems or will soon. You either need to find a way to increase your income or you need to cut down on your spending.

 But my cash flow is even. As long as I don’t go into the negatives I’m okay, right?

 If you did not include money going towards savings or retirement in your monthly expenses then no. Unexpected expenses can happen at anytime and if you want to be financially secure you need to be prepared for that. Another fact of life most of us will face is increasing medical bills as we age and decreasing income. Putting money towards a retirement plan is absolutely essential.

Life’s Unexpected Expenses

Let’s talk a little more about being prepared for those unexpected bills that pop up. There aren’t a lot of guarantees in life but I am pretty sure at one time or another, mostly likely time and time again, things will happen that require you to spend money you didn’t plan on spending. To be prepared for this it is a good idea to work towards saving an “emergency cushion” that can be withdrawn from at any time. In order to calculate the dollar amount you should be working towards go back to your monthly expenses and times that amount by six. That will give you enough money to tap into if needed for any unexpected bills or money to survive off of if you are unable to work. If you are married, both spouses work, and either spouses income could cover the monthly bills you could look more towards three months of savings.

 How Eric and I do this:

Both Eric and I are extremely fortunate in that we each earn an income that could individually support the both of us should the other be unable to work. However, Eric will be getting out of the Army in about a year and because of the uncertainty after that we have decided to make our “emergency cushion” six months worth of living expenses.

The Basics of Banking

Now that you know an estimate of your cash flow in and out it is time to figure out what works best for you in handling your bills to insure they all are paid on time. This is a pretty personal matter in that each of us has things that will work for us. At minimum you should have a checking account and a savings account.

 How Eric and I do this:

When we got married Eric already had his checking account set up with USAA and my checking account was with a bank that did not have a branch anywhere near us, that made it pretty easy for us to decide on USAA as our bank. Beyond that however, we debated on how to set up our accounts and pay our bills each month. After some trial and error, but thankfully no late bills, we have a pretty good system that works well for us. We each have our own individual checking account that our paychecks get deposited into, we have a joint checking account that we pay the bills out of every month, and we have a joint savings account that our “emergency cushion” lives in.

Mobile and online banking has made our system extremely simple and efficient. When it is time to pay a bill we will move money from our own checking accounts into our joint account and then pay the bill out of that account. When I moved down to Georgia I had a hard time finding a job but knew eventually I would want us paying an equal share of the bills and that would be easier done by paying them all out of the single account. However, his auto loan and my student loan get paid out of our own checking account. Some couples might choose to split the bills down the middle – say each paying $600 per month. Another option is to figure out a percentage system. Say your spouse earns 60% of both of your incomes combined and you earn 40%. Your spouse would then cover 60% of the bills and you would cover 40%.

Each person or couple will have a way that works best for them, it’s just a matter of agreeing on it and finding what works best. Your financial plan isn’t set in stone, you can turn your financial future around and you can always adjust it as needed.

Please let me know if you have any questions or comments either by leaving them here on my page or emailing me at happyhereblog@gmail.com. Stay tuned for the next post in my financial mini series!

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