Take Control of Your Money

By Edel Jarboe

Whether you are living paycheck to paycheck or have built a nice nest egg, we can all benefit from being smarter about our money. For most of us debt, retirement, and saving for our kid's college education, are very big concerns. Studies show that the second most popular New Year's resolution is to gain greater control of our finances. Stop worrying about money and take control of your wallet. What are your money goals? How can you boost your money IQ?

Your Financial Picture A quick way to get a look at your financial picture is to subtract your monthly expenses from your monthly income; the amount you have left over is called discretionary income or spending money. Where is this money going? Are you spending it on entertainment, dining out, or on clothing? Mindless spending is the biggest drain on your wallet. If you want to see where your money is going, carry a small notebook with you to track your weekly spending.

Another important factor to consider is your money mind-set. How do you feel about money? Are you a grasshopper or an ant? Do you carefully consider each purchase or do you think tomorrow will take care of itself? In other words, why do you spend money the way that you do? If you have an ant-mentality you probably already have good saving habits, you just need to determine your long-term financial goals. But if you are a grasshopper, you will have to curtail your loose-spending habits and start thinking about and saving for your future.

What Are Your Financial Goals? Do you want to send your children to college? Do you want to retire early? Well, without a plan it is unlikely that you will reach your savings goal. You need a step by step plan that details what the money is for, how much money it requires, and when you'll need the money. Give your savings goal a specific dollar amount and break it down into realistic, manageable chunks. It seems hopeless when you say that you need to save $50,000 for your child's education, but if your child is 5 years old now, that gives you 13 years to save. In this example, you would need an initial investment of $2,500 with an annual investment of $3,600 in order to save $50,000 in 13 years. (The rate of inflation is 4% and the interest rate on your investment is 8%.) In other words, you would need to save $300 a month or $75 a week. The next step is to use a budget plan so that you can see where you spend your money and then figure out how you can save money in these areas. And, once you have a budget plan, you need to stick with it.

Money Saving Tips It may sound crazy, but even if you are in debt, always pay yourself first. Even though you can only set aside $20 a month at first, it will get you in the happy habit of taking care of your financial future. This helps build money confidence because you are telling your subconscious that you are in control of your money. And this also goes back to your money mind-set. If you don't feel like you have control over your money, then you will never master the art of successfully managing it. Below are more smart money ideas:

Tips for Reducing Credit Card Debt On a sheet of paper make a list of each credit card, the annual percentage ratre (APR), the balance owed, the monthly minimum payment, and the date owed. Pay more than the minimum on the card with the highest APR until you pay it off. Cancel this card and then begin paying more than the minimum on the next highest APR card until it too is paid off and so on. Get a lower interest rate. Just call up your credit card company and ask. Try for an APR of 13% or lower. Transfer the total of your credit card balance to the card with the lowest APR%. (Visit http://ww.cardtrak.com and http://www.lowratecards.com for credit cards with low annual percentage rates). Carry only one credit card (preferably one with a low APR) and use it sparingly and only if you can pay off the balance at the end of the month. Credit card hop. Take advantage of the "limited-time only low APR%" credit card offers. Transfer your balance and pay more than the minimum. But be careful and read the fine print. The "limited-time only low APR%" usually applies to transferred balances only. Any new purchases or cash advances are at the credit card company's normal rate. Also be aware that these low rates are typcially good for 6 months, then the rate goes up. For help with credit card debt, contact the Consumer Credit Counseling Service at 1-800-388-2227 for a location near you. Tips for Saving Money Keep at least 3 months living expenses set aside for emergencies. Get better interest on your savings (the amount in excess of your emergency fund). Use a money market mutual fund instead of a regular savings account. Shop around for the best yields on CD's or any other financial instrument. Avoid banks that charge a fee for using their ATM. If necessary, switch banks. Have money transferred automatically from your paycheck to your savings account. Contribute to an IRA (even when it is not tax-deductible) and maximize your participation in your employer's retirement savings plan.