Money is a tough topic to discuss, but I think it’s important to share best practices with friends, family, and you all! Managing money is a challenge at any age, especially for those of us in our late 20s/early 30s.
At this point in our lives, we’re trying to move on from our entry-level, postgraduate positions to something a bit cushier. We’re a few years into paying back student loans, that final payment seeming eons away. Bills continue to pour in month after month. Saving for a home is more difficult than ever as real estate and rent prices increase. If you do own a home, maintaining it is a constant financial strain. Retirement is often the last thing on our minds.
I’ve been managing my own finances since I got my first job at 16. At that time, that meant buying my first car – a 1994 purple Saturn affectionately named ‘Shark Bite’ since she had a chunk missing from the front fender (not my doing, for the record!), paying Shark Bite’s insurance, a cell phone bill, and clothing; whatever was left over was a bonus.
I find that friends and family often come to me for financial advice. I’m not a financial advisor or expert, but I worked in banking for over 7 years and definitely learned some things along the way.
Below are 10 money management tips that have worked for my family and me:
- Payday = bill day: Each payday, Brett and I review all of the bills that are coming due before the next time we get paid. This way, we know that everything is taken care of before we even spend a dime of our paycheck. I keep track of our monthly bills using an old fashioned calendar, noting when each is due. Whatever we have left over can be used for spending money, savings, retirement, etc.
- Focus on high interest debt payoffs first: This tip I can’t take credit for; our financial advisor gave us this advice a few years back and I’ve been following it ever since. Take a look at all of your debt that has interest attached and rank each from highest to lowest interest. Focus on paying off debt with the highest interest first. Once the highest interest is paid, focus on the next, and so on. I’ve used this tip to pay off student loans and I’m on track to pay them all off this year (4 years early!). Here’s how I’ve done it. I had loans from 3 different institutions; one was a pretty small amount so I focused on that first and paid double payments each month. Once I paid that loan off, I took the double payment amount that I would normally put towards that loan and put it towards the next highest interest bearing loan (in addition to my regular payment). Eventually, when I get to the last loan, I’ll be paying an extra $300 or so extra each month and will be able to pay it off earlier than expected.
- Don’t rush home renovations: It’s hard buying your first home and not want to make it exactly how you want, all at once. Make a one year, five year, and 10 year home renovation wish list. Set budgets or get estimations for each project and budget how much money you’ll have to save each month or year(s) to make it happen. Of course, there are some projects that need immediate attention, so focus on those first.
- Don’t charge it if you can’t buy it: I rarely use credit cards or sign up for store accounts (no matter how tempting the discounts are!). If I don’t have the cash available in savings to pay if off within that month, I don’t buy it. It’s so easy to make purchases and worry about paying them off later, but if you’re making minimum payments on credit cards, you’re going to end up paying much more than the item would have cost if you had just paid cash. Emergencies are bound to come up and sometimes using a credit card is the only solution, but generally I try to avoid them altogether.
- Once it’s in savings, fuhgettaboutit: Once bills are paid until the next payday, I stash at least 10% of our take home income into a savings account. Once I put it aside, I don’t take it back out. If you have a savings account, make sure it is an interest bearing account.
- Start thinking about retirement, yesterday: I know retirement is decades from now, but start thinking about it now. Time goes so fast! I just had my 10-year high school reunion – it felt like just yesterday I was walking across that stage – so I can’t imagine how fast 30 years will fly by! If your employer offers retirement options, contact the human resources department to make sure you are taking advantage of all of the benefits. Contribute as much of your check as possible. Typically, the money will be taken out of your check automatically, so you won’t ever miss it! If your company does not offer retirement benefits, contact a financial advisor to find out how you can get started. There are many options out there!
- Check-in with your partner: Brett and I talk about where we are financially on a regular basis. Scheduling these ‘check-in’ appointments with your partner quarterly (or more often, if necessary) will help you stay on track and make adjustments if needed.
- Keep a check register: This is so helpful! I know it’s old fashioned and everything can be tracked online, but it really helps to write it down in addition to double-checking it online. For me, writing it down makes it more concrete. Plus, if you notice transactions that you don’t recognize, you can catch potential identity fraud quickly.
- Work with a financial advisor: Even if you’re not a millionaire! Believe me, I’m no millionaire, but I think working with a financially advisor is really important. They’ll take a look at where you currently stand, ask about future goals, and suggest ways to help you get there.
- Enjoy it! Why else do we all work so hard? Saving, retirement, and investing are all really important, but make sure you enjoy some of it! Brett and I try to take a vacation at least once per year. This year we went to Hawaii and San Francisco, but it’s not always that extravagant. Sometimes we’ll take a stay-cation and do small day trips, take a couple of weekend trips throughout the year, or just take a week off and do absolutely nothing!
While these 10 tips help me, I’m always interested in learning about other ways to better manage money and invest.
What money management and investing practices work for you or your family?