10 Steps to Better Money Management
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- Pay yourself first – This is an important concept for getting ahead financially. Treat savings as a fixed expense. For many people it is easier when savings are deducted from the paycheck and deposited in 401(k)s, 403(b), savings bonds, etc.
Keep Good Financial Records – Develop a filing system for your family’s financial records. Make a folder for each savings for investment that you own. Save annual summary statements from investment accounts. These can be used to help calculate your gains or losses a time investments are sold. Make it a practice to reconcile your checking accounts regularly. Keep your household inventory up to date and compare with insurance coverage. Be sure the insurance is adequate.
Insure against Large Financial Risk – Review your insurance coverage annually. As your financial situation changes, and as your family situation changes be aware of increase or decrease in need for insurance. For example: a retire no longer needs disability insurance, but all other bread winners probably do. Inflation may increase the need for additional homeowner’s insurance. Increase in net worth may increase the need for liability insurance. Explore your family’s need for umbrella insurance. The need for life insurance may increase or decrease based on:
- Why you purchase life insurance
- Size and composition of your family
- Family’s assets and other factors
Invest for Long Term Growth – Plan your investments and work your plan. Don’t jump in and out of the market based on this week’s, month’s, or year’s performance. Keep history of the stock market in mind over the past 100 years stock prices have appreciated on average 7% per year.
Use Credit Wisely- Shop for credit! Don’t accept the first offer you receive. It is recommended to get at least three quotes before selecting a lender. Compare the annual percentage rate and other features of the loan. Always repay according to the terms of the loan. If by chance you have problems, call the lender and explain the situation.
Plan for Retirement – Social Security and pensions probably will not provide enough money to live in retirement as you now live. Determine how much you will receive from all sources and how much you will need to live at your desired level. Adjust for inflation, then determine the gap in income. Develop a plan to fill that gap. Extension Publications can assist you with retirement planning.
Set Specific Financial Goals – Determine with your family what you want, when you want it and what it will cost. An example might be a new house with a down payment of $20,000. you want the house in 2006. between now and 2006 how much must you save each month to accumulate the down payment? You might use the S.M.A.R.T. Goal activities to develop the plan.
- Live Below Your Means – Always spend less than you make. Save a specific amount of your earnings for example 10%. Track your spending to find ways that you can accomplish this goal. Record everything you spend for a month. You will probably find a number of leaks. For ideas of ways that you can plug leaks see “Leaks in Spending” from the
Go to School – Get educated – take some courses, watch money management programs on television, read financial books, and/or consult a financial advisor.
- Five factors often mentioned by millionaires as being important to success according to Thomas Stanley in his book “The Millionaire Mind” are:
- Integrity – being honest with all people
- Discipline – applying self control
- Social skills – getting along with others
- A supportive spouse
- Hard work – more than most
Think Positive – When facing challenges – and you will – a positive attitude is important. Anyone can give up and say: “I’ll never be able to save any money.” And as Henry Ford once said: “If you think you can or if you think you can’t, you are right.” Or another way to say it is: “If it is to be, it’s up to me.”