budget

How I Bought a Car for Cash

May 19, 2021 By Rachel Slifka Leave a Comment

It’s no secret that vehicles are depreciating assets. The second you buy a new car and drive it off the lot, its value plummets. Even though everyone knows this, it doesn’t stop most Americans from overspending on their vehicles. After all, we all want the nicest things so we can keep up with the Joneses! Well, I was in the market recently for a new (used) car, and made a promise to myself that I would pay for this vehicle outright in cash. And I’m proud to say, here’s how I bought a car for cash.

I Set a Budget

First thing’s first: I set a firm budget.

For some reason, large purchases make it especially tempting to disregard your budget. After all, you are only going to buy a car once every few years, making it easier to mentally justify additional costs. But by setting a firm budget, I was able to ensure I had enough in savings to pay the car in cash. If I went above my budget, I would have needed to pull money from my other savings accounts, such as my emergency fund, to pay for it (or take out a loan for the difference!)

I Set a Monthly Savings Goal

Once I set a realistic budget, I determined how much I needed to save per month. I calculated how much I needed to save per month by taking my budget and dividing it by the number of months I had to save. Obviously, the longer you give yourself to save, the less you will need to save per month. If you have a tight monthly budget, you’ll want to make sure you give yourself plenty of time to save!

I Cut Back and Saved Even More

Buying a car for cash has always been a goal of mine. So, I was super motivated to accomplish it. Because I was motivated, I found it easy to cut back and save more money each month.

When your eye is on the prize, you can really reevaluate your spending decisions. When I was saving for a car, I knew my desire to pay for a car in cash was strong. I realized I would truly rather save money instead of buying things that didn’t mean as much to me.

Keeping connected to my goal helped me purchase a vehicle months ahead of schedule, because I was willing to sacrifice.

I Found the Car with the Best Value

Lastly, and perhaps most importantly, I shopped around for the best value. I asked family and friends if they had a dealership they recommended. Upon doing so, I eventually found a family member who was looking to sell their own car. It was exactly the type of car I was looking for, and I knew it was well-maintained. In the end, I skipped the dealership and wrote my family member a check for fair market value. We both got more bang for our buck versus going through a dealership, so it was a win-win overall!

Budget Burnout: How To Keep Your Goals Realistic

April 27, 2021 By Vicky Monroe Leave a Comment

If you’re struggling to stick to your budget, it might be because you’ve set unrealistic goals for yourself.

We all want to max out our retirement accounts and aggressively pay down our debt. But it’s important to create a budget that accurately reflects your financial means.

If you only make $30,000 per year, it would be prohibitively difficult to save $1,000 or more per month. Building your budget around that kind of objective would be setting yourself up for failure.

Here are some tips to help you keep budget goals realistic so you don’t burn out and give up.

5 Tips to Keep Your Budget Goals Realistic

Go Through Your Bank Statements

When you make a budget, it’s important to use numbers that are based on your current spending. Creating your budget without looking at your bank statements is a recipe for frustration. If you guess how much you spend every month, you won’t know if the savings targets you’re aiming for are realistic.

Get out your calculator and bank statements from the past few months. Add up your fixed monthly expenses like rent first—they’re the easiest to calculate because they don’t fluctuate.

Then figure out how much you spend on discretionary expenses like groceries, eating out, and travel. You can do this by adding up how much you spent on each category over the past three months. Then divide it by three to find the average.

Don’t forget to account for semi-annual expenses like car insurance and miscellaneous things that pop up, such as car repairs and maintenance. Then record all of these numbers in a spreadsheet so you can easily reference them.

Cut Your Expenses Gradually

If you haven’t crunched the numbers before and figured out how much you’re really spending, you might not like the results. There may not be much money left over at the end of the month to meet the financial goals you want to achieve, like buying a house.

Experts recommend that you save about 20% of your income every month, which is a good benchmark to keep your budget goals realistic. If you’re not hitting that number, you may want to trim your expenses so you can set some money aside instead of living paycheck to paycheck.

However, it’s important to start cutting back gradually. If you reduce your eating out budget by half, you might find it too difficult to stick to and give up.

Instead, challenge yourself to reduce your spending on restaurant meals by 10% every month until you reach your goal. That way you won’t go through lifestyle shock.

If you have multiple spending categories you need to reduce, focus on just one or two every month so you don’t get overwhelmed. And if you mess up and overspend, don’t beat yourself up. You can always borrow money from another category or save a little less, which isn’t the end of the world if it’s just for one month.

It’s going to be hard to change your lifestyle, but in the end, it will be worth it.

Include Fun Money in Your Budget

If you’re a natural saver, you may have the opposite problem—well over 20% of your income is going toward saving and investing every month. While this isn’t a bad thing, it’s important to set aside some fun money to enjoy your life and keep your budget goals realistic.

You can’t always say no to drinks with friends or pass up that new pair of shoes you have your eye on. Denying yourself everything you want and sticking to a spartan budget will eventually lead to frugal fatigue.

So make sure you account for discretionary spending. Experts say it’s ok to spend about 30% of your income on things like shoes, clothes, takeout, and subscriptions.

Revisit Your Budget Regularly

Your budget is a living, breathing document. As your income and circumstances change, it’s important to revisit your budget to make sure it’s still working for you.

I like to review my bank statements and budget spreadsheet once every three or four months. But you may need to adjust your budget more often during the first few months of following it.

It’s unlikely you’ll get your budget 100% right the first time, so take a look at it every month or so and reevaluate it. Use apps like these if needed.

App	Fees and Minimum	Best for:
Personal Capital	Free	Monitoring wealth and spending
Simplifi	Free	Personal budgeting
YNAB	$84 a year or $11.99 a month (after a 34-day free trial), free for students for 12 months.	Personal budgeting

Reward Yourself for Sticking to Your Budget Goals

Sticking to a budget isn’t easy, especially if you’re used to living paycheck to paycheck. So when you nail it, make sure you have a reward planned to celebrate your financial progress.

Your reward doesn’t have to cost a lot of money—it could be something as simple as a cup of coffee at your favorite cafe. But do something to mark this achievement. Recognizing the hard work you’ve put in is key to avoiding budget burnout.

We all want to achieve our financial goals quickly, which can make it hard to set a realistic budget. But creating an aspirational budget that doesn’t reflect your current spending is setting yourself up for failure and frustration.

So make sure you base your budget off your bank statements and cut back your expenses gradually so you don’t get burned out.

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

5 Supermarket Psychological Tricks That Make You Spend More

March 23, 2021 By Vicky Monroe Leave a Comment

We’ve all gone into the grocery store for just one or two things and come out with a full cart and a much bigger bill than intended. But why is it so hard to stick to our shopping list once we get inside the store?

Supermarkets are set up to part you with your hard-earned cash, from the layout to the size of the shopping carts. Grocery stores are designed to get you to buy more than you really need, which is why it’s so easy to end up over budget.

If you want to lower your food costs, you’ll need to be aware of the supermarket psychological tricks that are driving you to spend too much. Here are five of the most common tricks and some tips on how to resist them.

5 Supermarket Psychological Tricks to Watch Out For

Scent Marketing

Have you ever walked by the bakery at a grocery store and gotten hit with the smell of warm, gooey chocolate chip cookies? Some grocery chains actually pump scents into their stores to make you hungry and get you to buy more.

And studies have shown that it works. When a Brooklyn grocery store called Net Cost started using a grapefruit scent machine in their produce department, sales jumped by 7%. Indulgent aromas like the smell of fresh baked goods are even more effective and can triple sales.

So the next time you walk by the grocery store bakery, try to hold your nose and resist the temptation to stray from your shopping list.

Ten for $10 Deals

One of the pricing strategies grocery stores use to get you to spend more is ten for $10 deals. Although it would be simpler to say each item costs $1, supermarkets display the discount as ten for $10 to get you to put extra items in your cart.

Believe it or not, this is one of the supermarket psychological tricks that actually works. Studies have shown that people buy more items when the price is displayed as ten for $10 rather than one for a dollar.

To resist this trick, make a grocery list at home and write down how many of each item you need. Then it will be easier to resist the temptation to buy higher quantities just because things are on sale.

Snacks in the Checkout Lane

One of the most common supermarket psychological tricks is putting candy and other snacks in the checkout lane. We’re all a little hungry by the time we get done shopping, especially since we’ve been around tons of delicious food. So grocery store owners hope that we buy a couple extra Snickers bars on our way out.

To prevent yourself from falling for this one, keep a high protein snack like trail mix in your glove compartment. If a bag of chips starts calling your name, remind yourself that you have a healthier option waiting for you in the car.

Bigger Carts

Research has shown that the size of our shopping cart has a huge effect on our food purchasing habits. In a recent study, simply doubling the size of the cart made consumers buy 40% more.

Grocery stores have taken notice of this and have steadily increased the size of their carts over the years. Between 2009 and 2011, Whole Foods nearly doubled the capacity of their trolleys to try to boost sales.

So if you’re having trouble sticking to your grocery budget, shop with a small basket instead of an oversized cart.

Store Layout

Last but not least, the store layout can trip you up and cause you to impulse buy. Dairy products are all the way in the back, which forces you to walk through the whole store even if you just need a carton of milk.

Supermarkets usually advertise sales on the endcap of each aisle so you see them as you walk past. These deals may cause you to put extra items in your cart and draw you into the main aisles of the store where all the processed foods are.

It’s hard to impulse buy milk, but easy to pick up a bag of chips you weren’t planning on getting. That’s how supermarkets get you to fill your entire cart even if you just planned on running in for one or two essentials.

I recommend always shopping with a list and trying your best to get in and out of the store quickly. The more time you spend inside, the more temptations you’ll be exposed to. You may even want to bring along a friend who can hold you accountable and tell you to put back that container of Oreos you don’t really need.

Resisting these supermarket psychological tricks is hard. But if you stick to your grocery list, both your wallet and waistline will be better off.

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If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.
Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

Why Self Care Should Be Included in Budget

March 12, 2021 By Kathryn Vercillo Leave a Comment

Self care. It’s such a loaded phrase. You know that you’re supposed to embrace it and yet maybe you’re not even quite sure what it means for you. And yet, taking care of yourself is really important. In fact, you should have a self care budget. Let’s explore what self care really means and why it matters.

“Self-Care Sunday” and the Problematic Buzz Around Self Care

Self care has taken off as a buzzword, so much so that it’s become something of a joke. Check social media and you’ll find thousands upon thousands of entries featuring hashtags like #selfcaresunday. The idea behind it is great: take time to take care of yourself. But the message has gotten lost. How did this happen?

The Marketing of Self Care

One problem has been that brands and businesses picked up on the concept of self care and began to market around it. So now there are all of these people trying to sell you products and services to help you better take care of yourself.

But spending a bunch of money doesn’t necessarily lead to self care. Sure, if you’re investing in your physical and mental wellbeing, then various products and services might add to your life. However, if you’re just lured in by the promise of abstractly feeling better, then you’re likely to end up disappointed. And this is how the concept of caring for yourself has practically turned into a joke when really it should be a critical priority.

The Pressure of Self Care

The other major problem with the marketing of self care is that it now comes loaded with a bunch of pressure, especially for busy women. Self care should be about how to truly take care of yourself, whatever that means. But all too often lately it ends up being just another thing on the To Do list. It’s another thing that people, especially women, beat themselves up about not doing, not doing well enough or not doing often enough. And that feeling is the exact opposite of self care.

So What Is Self Care?

So what exactly does it mean to take care of yourself? It’s probably not what you think. Sure, it can mean spa days if that’s your thing. But more than that it’s about taking the time to know yourself and then doing what you really need, regardless of how un-trendy that thing might be.

More than anything, self care means taking quiet time to really get in touch with yourself. It means that you turn off the devices, settle in, and listen to what your mind and body really need. The better you learn to hear your inner voice, the more you’ll know what you actually need in any given moment.

Self-care might include:

Taking time off of work – an afternoon, a long weekend, a vacation, a sabbatical
Reducing other obligations and expectations including those among family and friends
Starting a new project that you feel passionate about
Staying up late when you’re having a great time but then taking a nap the following day
Eating in a way that makes your body feel good
Making an appointment with a doctor, a therapist, a physical trainer or an acupuncturist
Being honest with your partner about your authentic feelings
Ignoring phone calls and listening to your favorite music for an hour
Signing up for classes to pursue an interest or new career path
Asking your friends to lunch when you need their support

Why You Need a Self Care Budget

So if self care isn’t about spending a lot of money on spas and trips to island getaways, then why do you need a self care budget? Sometimes self care does cost money. More than that, knowing that you have enough money to take care of whatever your needs may be allows you peace of mind.

Sometimes Self Care Costs Money

Even if you don’t spend a lot of money specifically on “treat yourself” items, self care can cost you some money in the following ways:

You might need time off of work. It’s important to have some money saved up in order to take the time that you need. If you have a self care budget then you can take any amount that’s left over within that budget each month and put it into a self care savings plan.
Certain things that are good for you do cost money. For example, in order to feel your best, you might need to eat higher quality food. Or you might want to pay for a gym membership, higher education, or, yes, a massage. If you have a self care budget, then you have accounted for those potential costs.
You can plan for impulse purchases. The fact is that sometimes you’ll set your self care aside. Then you’ll crash. Often this results in impulse spending. But if you’ve got a self care budget, then you’ve built in a cushion precisely for these times.

Knowing You Have Money for Self Care Helps Your Mental Health

Part of taking care of yourself is just giving yourself a little bit of ease. Knowing that you’ve set aside money each month for self care can go a long way towards allowing that ease in your life. Maybe you’ll spend the money. That’s great – that’s what you’ve set it aside for. But even if you don’t use it all, it helps to know that you could if you needed to. It relieves a burden. And that in and of itself is a form of self care.

How Much Money to Budget for Self Care

There are two ways to approach your self care budget.

The first is to look at what wiggle room you already have in your budget. Then use that to set a self care budget. For example, if you currently have $100 per month that is part of your “miscellaneous” budget then you might earmark all or part of that specifically for self care.

The second is to work with percentages. Try to aim for 5% of your budget to go to self care. If that doesn’t work for your finances, then what will? Be honest with yourself while still making this a priority. If you need to cut out expenses that aren’t helping your self care (streaming services for example) in order to make room for beneficial things, then do that.

If you enjoy reading our blog posts and would like to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Check out these helpful tools to help you save more. For investing advice, visit The Motley Fool.

Use These 5 Steps to Make and Stick to a Budget

May 13, 2020 By Kathryn Vercillo Leave a Comment

Do you find it hard to make and stick to a budget? You aren’t alone. However, if you break it down into bite-sized chunks, then you’ll discover that it doesn’t have to be challenging at all.

I can almost hear your protests. I can hear them because I feel them stirring inside my own mind. The arguments are familiar to me because I have found it hard to make and stick to a budget in the past. For me, making the budget is usually easy; sticking to it is the hard part. However, as someone with inconsistent income, even making the budget can be hard.

Like I said, it doesn’t have to be. Here are five steps that can simplify for you how to make and stick to a budget. Step one, setting SMART Goals, is where you make the budget. The other four steps will help you stick to it.

1. Make Your Goals SMART

The first step in budgeting your money is figuring out why you want to do this in the first place. Then you can set goals that align with that vision.

Why Do You Want to Budget?

Some of the most common reasons that people want to budget include:

Desire to save money towards a specific goal, such as a family vacation
Desire to save money more generally for the future, to have a cushion
Awareness that spending has gotten out of control, wanting to rein that in
A budget can assist you in feeling like you have more control over your finances, so that they aren’t a mystery
You and your partner aren’t on the same page about finances but you want to be

Set SMART Goals

Once you know why you want to make and stick to a budget, then you can set very specific goals. Use the SMART method:

Be Specific

You can work on the “S” of smart goals at the same time that you’re working to determine exactly why you want to make and stick to a budget. Answer the “what and why” details. For example:

“I want to make a budget so that I can be free of debt. Why? Because I find debt to be incredibly stressful. If I am able to reduce my spending and use the extra money to reduce my debt, then I will feel freer.”

Alternatively: “I want to budget so that I can save $10000 for a family vacation in Europe in three years. I want our family to have this memorable experience together without the strain of going into debt for it.”

Get as specific as you can to help you really drill down to the meat of the goal.

Make Goals Measurable

Now it’s time to apply numbers to that goal. How much do you want to save? What is a realistic amount to budget for each necessary expense in your life?

For example, “My rent is $1800 so I need to budget that much for rent. I currently spend $1000 per month on food. However, I can budget $600 instead. I will set the other $400 into savings.”

Alternatively: “I want to go on vacation in three years, which is 36 months. If I want $10000 by then, I need to adjust my budget so that I can save $275 per month.”

Is Your Budget Achievable?

This is where you marry your goals and dreams with your realistic financial situation. In other words, this is where you make a budget. You list all of your expenses. Go through your financial history to get a realistic sense of what you spend each month, not just on set items (such as utilities and your phone bill) but also on miscellaneous (such as entertainment and clothing).

Analyze what you spend and what you earn. Look at your budget goals and see if you can make the numbers work out. For example, in the case of the three-years-away vacation described above, can you adjust your budget to save that $275 per month? Most likely, yet. If not, then you might need to tweak your goal. You could plan for a vacation that is four years away or you could reduce the amount you would like to have within three years.

Make sure that you make your budget work on paper. That’s the only way you have a chance of making it work inn real life.

Are Your Goals Relevant?

If your goal isn’t truly in line with your personal values then you’re not likely to make a budget and stick to it. Saving for a family vacation is relevant if you all enjoy traveling and you believe that such experiences are valuable individually and collectively. It’s worth it to you to stick to your budget because you believe in the larger goal it will allow you to accomplish.

If, on the other hand, you don’t actually enjoy traveling but you think you “should” because it’s “good for the kids” then you might self-sabotage your budget without intending too. Go back to the “why” that you looked at earlier and make sure that the answer aligns with all of your loftier ideals in life.

Place Time-Boundaries on Goals

As you set the specifics of your goal, you will want to limit it with time. The aforementioned three years of saving is a good example.

You can set time boundaries even if your budget goals seem looser. For example, “I want to create a budget that will allow me to save money so that I have a cushion for the future.” Make that more specific. How much do you want to have? By when do you want to have it? How can you break down that budget into annual and monthly goals?

For example, “I want to retire at 65 with $500,000 in my savings account. I am 35. That means I need to save $500,000 in 30 years, which is about $16,700 per year or $1388 per month.” This lets you know that you need to set a budget that will allow you to save $1388 within a one- month time frame.

2. Write Out Your Goal and Post It

Use the SMART method to create your budget. If you need additional help with the specifics of analyzing your finances in order to create this budget, here are some helpful links:

Once you have established your budget, write it out. Make it like a mission statement. Couch it in affirmative language. Then post it where you will see it regularly.

You might want to post it in several places. For example, a bullet list of the steps you plan to take makes a great phone screensaver. A paragraph about why you’re budgeting goes well on an index card that you use as a bookmark. Get creative. Where will you see the plan most frequently and how can it most motivate you to action?

3. Review Your Progress Regularly

The visible reminder from step two will help you stick to your budget. However, you should build in additional accountability. Therefore, you should review the goal regularly. Check your progress against the goal. Ask yourself if you need to make any adjustments. (You can always go back through the SMART steps if you do.)

I like to do a weekly quick check-in with my budget. Then I do a bigger review at the end of each month. This helps me stay on track throughout the month. It also helps me plan out the next month in the best way possible. I may discover that I can’t stick to my $600 food budget, so I will rework my budget accordingly in order to still meet my goals.

4. Reward Yourself for Success

Make small goals within the larger goal. Each time that you achieve one, reward yourself. You do not have to spend money to reward yourself. Keep a running list of things that give you great pleasure. When you meet a goal, choose at least one thing from your list and indulge.

This step is especially great for families or couples trying to stick to a budget together. Instead of nagging and annoying each other into compliance with the financial restrictions of a budget, you can use teamwork and encouragement to achieve your shared goals. Celebrating together will build momentum and keep you working towards the goals together.

5. Get Back on the Budget Horse When You Fall Off

Are you the type of person who plans to diet, then the second that you “cheat” you just go into a total binge? Many people do this when it comes to budgeting. You work hard to set the budget goals. You restrict your spending to see the budget. Then something happens and you slip. You over-spend. It feels like you’ll never get back on track, so you stop sticking to the budget altogether. This doesn’t make sense.

With a diet, let’s say that you ate a piece of cake which went over your caloric budget. Does it make sense to then just add a whole bunch more calories on? Will it feel good to your body to quit the diet altogether and eat all of the foods that are worst for you? No. You ate the cake. Enjoy it. Then move on. Get back to the diet. Eat the way you intended starting with the very next meal. Likewise, overspending once doesn’t mean you should keep spending. Go back to the budget. Start with it right away, as soon as you realize that you slipped up. Don’t berate yourself, shame yourself, guilt yourself, or avoid the truth. It’s all okay. Get back up on that budget horse and ride it to your goal.

What is the biggest challenge that you have had when it comes to learning how to make and stick to a budget?

Six Core Principles For Managing Your Personal Finances

September 17, 2019 By Susan Paige Leave a Comment

Personal finance pertains to managing, budgeting, saving, and investing money at an individual level or within the family unit. The process involves assessing your financial situation by monitoring your income statements and balance sheets. Then, you set your short-term and long-term goals, and create a plan to accomplish them.

Knowing how to manage your financial resources properly is a crucial life skill. It should be taught early to kids who already have basic knowledge in mathematics. Most essential is knowing how to save money so that it won’t be much of a chore when they become young professionals with their own income.

It’s good to keep on monitoring and reassessing your financial situation as you grow older. Here are some things you need to know about managing your personal finance:

Practice Self-Control

A lot of people have the misconception that they should reward themselves during payday. While there’s nothing wrong with splurging on food or other luxuries that are within your budget sometimes, falling to the impulse buying pattern regularly is a problematic thing.

Giving in to temptation all the time can significantly harm your financial well-being, especially when you don’t even really need the item that’s on sale. You should delay these types of purchases for a day and think about whether that pair of shoes you’re eyeing will be useful and won’t just add to the clutter in your closet.

Make Lifestyle Adjustments

Reduce frivolous spending by living contentedly. If you can’t afford a new house yet, you shouldn’t stretch your finances just to purchase one. According to Moneytaskforce.com, this type of thinking is prevalent in the younger generation because they believe it’s a good investment. However, one should also consider the depreciation in the property’s value, as well as other costs such as maintenance and repairs.

Also, you don’t have to live in a two-bedroom apartment just because you can. It’s better to accustom yourself to living simply in a pad rather than keeping up with the Joneses or the Kardashians.

These are a few other life changes that you can do to help you save money and become healthier at the same time:

Bike or Walk to Work – If you’re fortunate enough to work near your place, invest in a bike or walk to the office. Not only will you save on maintaining a car or paying for an Uber, but you’ll also get your daily dose of exercise. If your office is far from your home, you can still save money by using public transit.
Stop One Bad Habit at a Time – Tracking how much you spend each month can be eye-opening, but it’s also overwhelming when you think about where you should begin. Ditching vices such as smoking or drinking liquor can be an excellent place to start. For instance, if you spend 10 USD a day on cigarettes, you’ll end up saving 3,650 USD per year. Plus, you can allocate the amount for your savings to motivate you to kick the habit.
Make Everything at Home – It can be tempting to order takeout after a hard day’s work. However, buying food frequently can quickly add up, and you end up wasting your money, which could have been used for your nest egg. It helps to make your lunch and dinner in batches so you always have meals that you can reheat when you don’t feel like turning on the stove, as well as washing pots and pans. Plus, home-cooked meals are way healthier than fast food.
Create a Grocery List – When you decide to get cooking, you have to note down the ingredients that you’ll need. The list helps in lessening the time you spend in the grocery looking at products on the aisles, which reduces the risk that you end up buying more than what is in your budget.
Review Your Employee Health Benefits – Reread your contract again and check if your company offers employee health benefits. This can come in the form of discounts on gym memberships, rewards for reaching fitness milestones, and free programs that will help you quit vices or lose weight.

Know Your Net Worth and Track Debt

Your net worth refers to the combined value of your assets, both non-financial and monetary, minus all your liabilities. In theory, it’s the cash that you’ll end up with if you sold everything you had and paid off all your debts. While there’s no specific number that you should aim for, you must be able to track your progress yearly and see improvements over time.

This number is crucial because it allows you to view your current financial situation at a glance. There are three factors that you need to calculate first before arriving at your net worth:

Assets

Your assets include the value of your home, real estate properties, and vehicles. If you have a business, your company is also considered an asset.

You also need to collect the latest statements of other liquid assets, such as the funds in your checking and savings accounts, as well as other investments.

List your other valuable possessions like jewelry, heirlooms, and rare collections. Items worth 500 USD and above are considered assets.

Add the figures to get your total assets.

Liabilities

It’s also important that you track your debts because these are considered liabilities. The balance on your mortgage and car loans are examples of this financial aspect. List down their current balances.

Other types of liabilities at a personal finance level include credit card debts and student loans.

As with your assets, you need to add the balances of these debts to get your total liabilities.

Net Worth

After doing the tedious task of calculating your total value and debts, you can simply subtract your liabilities from your assets.

You shouldn’t worry too much about the number that you end up with, whether it’s small or large or negative. Think of this figure as a reference point for your future assessments.

Do a yearly check on your financial situation by repeating the process of calculating your assets and liabilities to get your net worth. Comparing it with previous numbers can help you monitor your progress and validate that you’re doing things right.

Stay Updated on Your Credit Score and Report

Your credit report is a comprehensive document that contains information on your past and current credit agreements. It gives lenders an idea of your total debt, the age of each account, and your consistency in making repayments.

Meanwhile, you can think of your credit score as a grade given to you based on the data in your credit report. It makes it more straightforward for lenders to evaluate the risk of allowing you to borrow their money. Typically, it’s a three-digit number that ranges from 300 to 850.

Three credit bureaus give you a credit score: Equifax, Experian, and TransUnion. When you ask for this financial score, you actually get three different numbers from these reporting agencies.

It’s crucial that you have a copy of your credit report and you know your credit scores. This way, you can assess your current financial situation and make remedies as well as adjustments on your lifestyle to improve your score.

Set a Budget

Creating a budget can help you stay on top of your finances. You should note down your regular expenses each month, such as your utility costs, rent, insurance payment, and your daily allowance to get a snapshot of how much income you need to stay financially stable.

Plus, you should also prioritize setting money aside for your short- and long-term goals. Dedicate a portion of your salary for your travel funds, but don’t forget about your retirement nest egg as well.

Know Different Saving Methods

Find the best money-saving ways for your financial situation. The same method won’t work for everybody, so you should educate yourself on the different techniques to find what’s best for you.

Here are some popular money-saving tactics that you can try out:

Figure Out the Percentage – A well-liked way to save a portion of your salary is to divide it by percentage. The 50/30/20 budgeting rule of thumb splits up your income into three parts. You allot 50 percent for your monthly expenses for necessities like your rent, groceries, and utilities, among others. Meanwhile, you set aside the 30 percent for luxuries, such as shopping, eating out, and your hobbies. Lastly, you put 20 percent of your money into your savings.
Set a Dollar Amount – For some, spelling out a specific amount is more helpful in keeping them on track with their financial goals. This is ideal for those on a tight budget because of its flexibility and customizability.
Collect Loose Change – This technique is perhaps the slowest way to save, compared to the other methods. You just have to keep the change that’s left in your pocket after each day. It may take some time to buy that particular item you’re eyeing, but it’s a start.
Join a Savings Challenge – You can find lots of savings challenges online. One of these is the 52-week money challenge where you pick a number among a list and attempt to save the specified amount for that particular week until you complete an entire year’s worth of savings.

Conclusion

Managing your personal finance doesn’t need to be an extravagant affair. You just need to have the right mindset and live within your means. You also have to determine your net worth, credit score, and credit report so that you have a holistic idea of your current financial situation.

Lastly, set a budget and stick to it. Educate yourself on the different money-saving methods and find the right one that works for you.