3 Tips to Promote Money Management Stability
When I was still working my corporate job I remember getting excited every other Thursday morning because I knew I could look at my checking account and see a comma re-appear in my balance. However, as I paid off my household bills I would come to the realization that it never seemed to be enough to last me to the next pay period. This is a feeling that I have felt frequently throughout my experience in the traditional workforce, and regardless of the fact that I managed to increase my yearly salary 38% in less than 2 years I always seemed to feel like the checks were never enough. After sitting down and getting serious about where I wanted to be financially and my money goals for the next five years, I decided that I needed to to make a change and really start monitoring my spending habits. Here are three money managing tips that I currently use to keep myself on my five year plan to financial stability.
1) Track Your Net Worth
You may not have reached celebrity status yet, but that does not mean you do not have a net worth. Your net worth is the difference between your assets and your liabilities. It can tell you where you are financially in life. This is something that you should keep track of quarterly (not to be confused with a credit score that you should check yearly).
When talking about personal finances the assets that matter are the tangible ones. Banks look at tangible assets as things that you own that you can liquid into a substantial amount of cash; they have a clear value. A “good” asset normally appreciates in value so that when you go to sell them you can get a positive return. A house is a perfect example of this. If you buy a house and the land it sits on, add your hardwoods, marble counter tops, and another bathroom to your property and you have appreciated the value of the house you originally bought. From there you can rent it out and then sell it later. This is making an asset work for you!
Asset allocation is important when you are tracking your net worth because it is referring to all of the different classes of assets that you own: ie.: property (if you own it), stocks, bonds, and gold putting a value on it and then subtracting what you owe creditors/debtors ie: student loan debt. As you knock down your debts it can be the perfect marker to let you know if you are reaching your financial goals.
Net Worth = Assets - Liabilities
Sidebar: It would be advantageous of you to diversify your portfolio with US stocks and international stocks so your entire portfolio is not dependent upon the success of the US stock market.
2) The All CASH diet. (Envelope Method)
A good way to combat frivolous spending is to go on an all-cash diet. If you are swipe happy, try ditching the credit cards by way of your nightstand and instead, use only what is in your wallet to cover your day to day spending habits. This will enable to you to spend only what you have budgeted and leave more money in your account to pay down bills.
Financial speaker Dave Ramsey speaks very highly of the envelope method:
1) Budget out the cash that you for your monthly expenses.
2) Earmark individual envelopes for each category of your life: ie. Car, Food, Entertainment.
3) Fill each envelope with the cash budgeted for that category in that specific month and spend as needed.
4) Once the envelope is empty you can no longer spend on that category for that month.
People have reported that sticking to the “All Cash Diet” has enabled them to pay off over $35,000 in debt over two years.
We have all seen the Secret Deodorant commercials championing women and their right to ask for more money in the workplace.
With that being said, you have to be FEARLESS in knowing your worth and asking for it. You will never be able to reach your money goals if you are not bringing enough of it into your household.
Before starting a new job let the company throw out the first salary figure. We tend to tell HR at our interviews what our currently salary is, and regardless of how much I appreciate Glassdoor for providing a salary range, there is a big chance that you may be lowballing yourself when you give your desired pay before your future employer shows their hand. Let them give you a number and use that as the starting point for you negotiation. This is true with time off, sick days, and your potential 401k match.
If you are currently in a job and considering asking for a raise, create a list of what you do on the daily basis for thirty days. Highlight what you do that is in your provided job description, and then use a different color to highlight what you do to go above and beyond those core competencies. Be sure to include figures to illustrate the results you have achieved for the company and do not be shy when emphasizing the value to bring to the company as a whole.
Do you have any tips that you can share to help promote the task of money management? Leave a comment below and share the wealth!
Written by: Chay Rodriguez