Managing your money is an important life skill. If you handle your personal finances wisely, you will enjoy peace of mind, financial security, buying power and freedom.
Money management does not need to be complicated and should be a routine exercise.
There are three secrets to money that I share with elementary children when we are doing money workshops.
You need to share your money – your wealth. My parents always reminded us growing up that there is always someone in more need than you.
You can also view this as your spiritual money – count your blessings and help others in need. There are ‘theories’ that if you give to others on a regular basis, then wealth is returned to you.
There is a tax savings advantage – our contributions to bonafide charitable organizations are deductible. You are rewarded for your good deeds.
How much do you share? 10% of your income – that is $0.10 for every dollar you earn. You have the other $0.90 for every dollar.
Idea – Have a family meeting to decide which charities you will share with – include the kids.
You need to save!
For emergencies – to meet your goals for retirement, college savings for your children, caring for for your parents, etc.
Your emergency fund must be liquid – that means the money should be easily accessible in a savings account so that you can acquire the funds when an emergency arises.
Your other long-term savings funds, such as, retirement, college funds, etc. should be placed in investing vehicles that match your goal. Your Investment Advisor can help you find the right match out of all of the options available to investors.
How much do you save? MINIUM 10% Again, this is only $0.10 for every dollar you earn.
When investing your savings your money will grow.
Take advantage of employer sponsored retirement plans – for the savings benefits – for the tax benefits – for the convenience of having your funds put away automatically.
Idea – to pay yourself routinely – set up an automatic deposit. For example, have your employer deposit a portion of your net pay into your savings account directly.
This is the area where most of the attention is needed. You need to review your past – where your money has been going. You must analyze your spending to make sure that your family finances stay in line with YOUR plan. Your spending should include your living expenses (ie., home, utilities, food, medical, etc.) . Your plan for spending should also include income taxes – I realize no one wants to pay them, however, they are required.
How much should you spend? Average 70% When reviewing your past – if your spending is greater than what you earn – you need to develop a plan. When spending exceeds income, this is when financial troubles arise.
There are a variety of ways to manage your spending. Keep a daily log for a few weeks – you will quickly see how and where your money goes. This log will help you determine where you can make changes in order to meet your financial goals.
In order to manage your family funds, you must list your goals. What do you want your money to do for you? What do you expect to accomplish financially in 1 year, 5 years, 10 years, etc.? Once you identify your family goals you can develop your plan of action. How will you get there? What lifestyle changes do you need to make? Where can you cut expenses? Remember, this needs to be reviewed REGULARLY. Once your plan is prepared, you can review it along with your monthly income and expenses once a month, or once a week.
There are many ways to track to finances too. Some prefer, pencil and paper – it helps them to sort their thoughts and visualize the plan. There are also various over-the-counter software packages. Many are user-friendly. Quicken (by Intuit) or MS Money (by Microsoft) or basic spreadsheets can be set up –templates are available on various websites. Do not be afraid to consult professional help. Sometimes you may need an outside guide to assist with your plan.
Remember, managing your money can be fun. Especially when you have a plan in place and everyone has a common goal. The family can work together.
The following are some RECOMMENDED WEBSITES to enhance your money savvy skills (for the whole family):
The following are RECOMMENDED BOOKS to enhance your money savvy skills and inspire you:
- The Millionaire Mind, by Thomas Stanley
- The Millionaire Next Door, by Thomas Stanley
- The Millionaire Women Next Door, by Thomas Stanley
- Ye$ You Can Achieve Financial Independence, by James Stowers
- Rich Dad Poor Dad, by Robert Kiyosaki
- 105 Questions Children Ask about Money Matters, with a foreword by Larry Burkett
- Growing Millionaire Kids by Marvin Sparks and Bruce Palaniuk
About the Author: Information provided by Lesley Johnson of Johnson Financial Services. Lesley is the mother of four (ages 11, 6, 5, and 2). Her family resides in Pleasant View, TN. You can email questions and comments to firstname.lastname@example.org or call the Money Hotline at 816-289-0476. JFS offers many services including: business accounting; income tax preparation and consulting; financial consulting; fiscal training; and personal accounting. www.JFSMONEY.com IRS CIRCULAR 230 Disclosure: Under U.S. Treasury Department regulations, we are required to inform you that, unless expressly indicated, any tax advice contained in this list, or any attachment hereto, is not intended or written, to be used, and may not be used to (a) avoid penalties imposed under the Internal Revenue Code (or applicable state or local tax law provisions) or (b) promote, market, or recommend to another party any tax-related matters addressed herein.
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