The Extremely Simple Guide to How I Deal With Money
I talk about how much academia annoys me more often than I probably should. While having this kind of discussion a few days ago with a friend, she told me that though she has graduated from college, she has no idea what to do with money in the real world or how to balance her checkbook.
I'm kind of a nut about knowing what to do with money. In fact, I wish I had some money with which I could know about doing things, and possibly I might even do them.
So, here's how I deal with the money I do have:
Balancing My Checkbook
GOAL: To make sure that the bank is only charging you for transactions you authorize.
HOW I DO IT: Essentially: I don't. I keep a running tally in my head of what I've spent (rounded up), and I deduct that from the balance in my bank account. Instead of balancing a checkbook, I check my bank statement online around once a week in order to make sure that transactions are posting and processing correctly against my receipts.
SOME SUGGESTIONS: Balancing a checkbook is, in my opinion, a pen-and-paper skill in a digital age. You're checking for errors, but if you monitor your account regularly (and in my opinion, you absolutely should be monitoring your account regularly from a secure and private computer on a trusted network in order to catch anomalies early), you're taking care of 95% of the goal at 5% of the hassle. Your bank's software is almost certainly more accurate than your calculator, and with online banking that can show you transaction detail, there's no need to do the addition yourself unless you're really paranoid.
Budgeting
GOAL: To spend less money than you earn and to accrue net worth over time.
HOW I DO IT: I know what my approximate monthly expenses are, and I know about how much money I can expect to make over the near future. (I also know that I'm going away to school and it will cost $1000 to buy textbooks). So, I worked out how much money I'll have left over after that, and allocated a percentage of that to save. After that percentage, I arrived at the amount of money I can spend, and I try to spend less than that number.
SOME SUGGESTIONS: Remember that everything you buy now is something you won't be able to buy tomorrow, and keep track of the money you're spending. Only spend money that you have.
Which brings me to...
Credit Cards
GOAL: To prove to lenders that you pay back money you borrow so that someday when you want to buy a house or other big thing that actually needs financing, you can get a loan.
HOW I DO IT: I pretend that it's the same thing as cash. When something goes on the credit card, I consider the money already spent, and I never spend any money that isn't currently in my bank account waiting for me to go home and transfer it to my credit card.
SOME SUGGESTIONS: Don't spend money you don't have. Don't spend money you haven't already earned. Don't spend money that you haven't received yet.
That's really most of it, but with those go some other things. Don't carry a balance from billing period to billing period, because then they charge you interest. Remember that credit cards are not free money. If you aren't good at keeping a tally of how much money you're spending, then leave the card at home, only bring a limited amount of cash with you and only use that.
I'm kind of a nut about knowing what to do with money. In fact, I wish I had some money with which I could know about doing things, and possibly I might even do them.
So, here's how I deal with the money I do have:
Balancing My Checkbook
GOAL: To make sure that the bank is only charging you for transactions you authorize.
HOW I DO IT: Essentially: I don't. I keep a running tally in my head of what I've spent (rounded up), and I deduct that from the balance in my bank account. Instead of balancing a checkbook, I check my bank statement online around once a week in order to make sure that transactions are posting and processing correctly against my receipts.
SOME SUGGESTIONS: Balancing a checkbook is, in my opinion, a pen-and-paper skill in a digital age. You're checking for errors, but if you monitor your account regularly (and in my opinion, you absolutely should be monitoring your account regularly from a secure and private computer on a trusted network in order to catch anomalies early), you're taking care of 95% of the goal at 5% of the hassle. Your bank's software is almost certainly more accurate than your calculator, and with online banking that can show you transaction detail, there's no need to do the addition yourself unless you're really paranoid.
Budgeting
GOAL: To spend less money than you earn and to accrue net worth over time.
HOW I DO IT: I know what my approximate monthly expenses are, and I know about how much money I can expect to make over the near future. (I also know that I'm going away to school and it will cost $1000 to buy textbooks). So, I worked out how much money I'll have left over after that, and allocated a percentage of that to save. After that percentage, I arrived at the amount of money I can spend, and I try to spend less than that number.
SOME SUGGESTIONS: Remember that everything you buy now is something you won't be able to buy tomorrow, and keep track of the money you're spending. Only spend money that you have.
Which brings me to...
Credit Cards
GOAL: To prove to lenders that you pay back money you borrow so that someday when you want to buy a house or other big thing that actually needs financing, you can get a loan.
HOW I DO IT: I pretend that it's the same thing as cash. When something goes on the credit card, I consider the money already spent, and I never spend any money that isn't currently in my bank account waiting for me to go home and transfer it to my credit card.
SOME SUGGESTIONS: Don't spend money you don't have. Don't spend money you haven't already earned. Don't spend money that you haven't received yet.
That's really most of it, but with those go some other things. Don't carry a balance from billing period to billing period, because then they charge you interest. Remember that credit cards are not free money. If you aren't good at keeping a tally of how much money you're spending, then leave the card at home, only bring a limited amount of cash with you and only use that.