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A Beginner's Guide to Money Part I

I was reading an article, one of hundreds, on how Americans are not even close to being ready for retirement. Furthermore, these articles talk about how American's in general are poor handlers of money. After reading hundreds of these articles all coming to the same conclusion, I wondered what is the answer? Well, let's look at how the cards are stacked against the average American.


12 years of education, plus maybe college and no formal education on money, in most cases that is a big part of the problem.


People look to the sales/money motivated financial services industry for advice which is aligned with the industry's best interest.


Where do I even start? That is the question that I get most of the time. So, in honor of Financial Literacy month (April), I am going to write a multiple part piece on good places to start when it comes to money. It starts with habits. If you want a different result on your life, change your habits.


#1 Habit - Start saving money

Build up your emergency account first. If you are in debt, that will stop the bleeding because we end up adding to the credit cards because we don't have the emergency account set up. Set a goal of 5,000 to 10,000 and get that emergency fund set. Once you get that set, then start focusing on the long-term. If you can do both at one time (retirement and emergency account) then great - do so. For most people, it is best to start in baby steps. The emergency fund is the best place to start.


#2 Habit - Start Tracking your spending

If you want to make the biggest change in your life, start tracking your spending and where your money is going. That is only step 1 of the creation of a solid spending plan. I am not suggesting you start a budget. Just start tracking spending. These are baby steps we are talking about. I will add the other steps towards a establishing a solid spending plan later in this series. Either track it on paper, track it on a computer software program such as Quicken, or on an excel spreadsheet (we have one developed - email us - judy@prudentmoney.com and we will send it to you).  


Just make it a habit to sit down and track your spending once a week. You will see where your money is going. Until you start this exercise, you wont be able to set up a foundation for a secure future.  


#3 Habit - Educate yourself

Make it a habit to listen to radio shows, podcasts, read books, etc. about what it takes to be successful with money. Whether it is a hour a week or 15 minutes a day, set up a goal and stick with it until it firmly develops into a habit.  


If you can get good at these habits you will start to lay a firm foundation. Remember this is a process. The point is you have to start somewhere. 

 

This should get you started. I am going to be writing a lot of material this month. All of these pieces will be in small segments so that you can apply a little change at a time. So stay tuned.