EXECUTIVE
Making Sense – and Cents
BY MICHELLE KONKLE
Are you one of the
many Americans
who don’t have a
personal budget?
Do you find yourself
living from paycheck
to paycheck, never
having anything
left over to save for
a rainy day?
More and more of us are faced with this dilemma
than we care to admit. It seems we all have the
intention of creating a budget later, but somehow
later never comes.
We’re also faced with the dilemma of whether
to save for retirement, children’s college, a rainy
day, a vacation, or countless other things that we
can’t seem to prioritize and begin saving.
First, let me just say that no one likes to talk
about a budget, it is the dreaded six-letter four-
letter word! Unfortunately it is one of the most
important conversations you can ever have.
This is the best time of year to work on a budget.
Why not January you may ask, well I’d say January
is full of other resolutions that may add a line item
to your budget instead of taking one away. This
time of year, you’re thinking about your tax return.
And while you still have that extra cash, let’s look
at ways to keep it longer!
How do I create a budget? I don’t know where
to start.
1. Create a record of your expenses and income.
Start by writing down everything that you’ve spent
that month. There aren’t too many people that
still use a check register, but your bank still has
them available. Some of you may ask, “What is a
check register?” Well, in the not so distant past we
weren’t connected and online via our smartphones
with balance alerts and everything else available
at our fingertips. We had to keep a record of all of
our purchases and deposits in a check register and
wait for our monthly bank statement to come in
the mail to reconcile, or balance, our checkbook.
There is something to be said for that now nearly
nonexistent ritual, it really helped you know where
you were spending your money.
2. After you’ve created that record of your
expenses and income, do you have money left
over or are you negative? If you’re negative, you
truly need to take a hard look at where your money
is going. Next thing is to categorize your spending:
housing (rent, mortgage), utilities, restaurants,
shopping, credit card or car loan payments, to
name a few. Now ask yourself, “Can I skip the
coffee today? Do I really need that dress (handbag,
golf club, etc.)?” More times than not, the answer
is yes on the coffee and no on the dress. It may be
difficult to drive past the coffee shop, but let’s put
it in terms of your future. You spend $15 a day
on coffee and lunch during the work week, that’s
$3,900. Wow! And is that golf club going to help
you achieve financial freedom?
3. Now comes the hard part, actually making
these things happen. So you’ve set a goal to save
$50 per week. Easy way to do that? Set up an
automatic transfer from your checking to savings
or update your direct deposit information so that
the money goes straight to your savings without
a stop in the checking account. Still feel you’ll be
tempted? Start an account at another bank and do
not get a debit card or checkbook. That way you’ll
actually have to go to the bank to get your cash.
This gives you more time to think about whether
or not what you’re buying is a need or a want. We
hope that this money becomes something that
you mostly forget about, out of sight out of mind.
4. Let’s look at that $50 per week over five years
– that’s $13,000! Now, that is simple math and not
including the power of compounding. When you
add in the interest element, that number quickly
exceeds $13,000.
What is compounding interest and how does
it help me?
Compounding interest is basically earning
interest on your interest. It allows your money to
work harder and grow faster. Assume you have
$1,000 and you earn 3%, you now have $1,030.
The next credit you receive of 3% will be on the full
EXTOL : APRIL/MAY 2019
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