PhotobucketI saw a very useful article on the Get Rich Slowly blog. I liked this site already just from the title. I know his advice is going to be sensible not some harebrained get-rich-quick scheme. Speaking of sensible, you should read the article: 8 Ways to Take Control of Your Finances in 2008. These are advice that we probably all know already, but just haven’t made a conscious decision to start following them. For 2008, we should keep these bullet points in mind:

Track every penny you spend
I know of some people who actually do this all the time. I, personally, know that this is not a task I can maintain. I should do it for a short time though just to get an idea where I’m nickel and diming myself. I know that one of my biggest mistakes is the impulse spending that I do. When the girls ask for something that costs 50 cents or a dollar, I usually say yes because, after all, it’s only a matter of a few cents. But by the end of the week those few cents here and there have added to quite a few dollars.

Develop a budget
I’m not good with budgets either, but you don’t have to have to budget down to the penny. I have what I call an estimated budget. I would probably do better if I had a firm budget and stuck by it, but I know myself and there is only so much budgeting I can take. So what I do is I get a general idea of what I need and divide my income (paycheck) into three. My savings is already taken out before I even get my paycheck so at least I don’t have to worry about that. The remainder that gets put into my checking account, I divide into three: for bills, for food and fuel, and for incidentals. I like incidentals the best, that’s my discretionary fund. Just make sure your incidentals are not bigger than your savings.

Start an emergency fund
I’ve always used my savings as my emergency fund. BAD IDEA. Really, I should set up an emergency fund for emergencies and just leave the savings alone. Although, if you keep the bulk of your savings in an investment account like an IRA, mutual fund, or something else where you have no easy access to them in case of emergency, that will work too. That’s how I have my money now. I have my 401K separate from my regular savings. The mistake I’m making is the amount I’m depositing in savings is bigger than the 401K. It should be the other way around, but I think I still have that fear of not being able to get my money when I need to.

Get out of debt
Yeah, easy to say, isn’t it? Very hard to do though. It is so tempting to delude ourselves into thinking we have more money than we do by using our credit cards and conveniently forgetting that we eventually have to pay them back. I try to live on cash or debit as much as possible. I’m slowly training myself to forego of items that I can’t immediately pay for in cash. If I have to take a loan out for it, I probably don’t need it. The only exception to this is a car or house, and only if you need it.
Open a retirement account
An insurance agent/broker first told me you can’t ever be too young to start saving for your retirement. Since then, I have been hearing that advice said over and over again. There is lots of truth to it. I am seeing people now who are retirement age and can’t retire because they don’t have enough to live on. Sure, you’ve probably said “I will die before I get old enough to use up all my assets”. I’ve said that too, but what if someone was being mean to you and let you live until you’re old and broke? Don’t take the chance. It’s better to have some extra for your heirs than for your children to go broke trying to take care of your old butt.

SPEND LESS THAN YOU EARN

This is the fundamental money skill. It’s common sense, yet many people never learn do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending or develop a budget, but those steps aren’t completely necessary. Even if you do nothing else in this list, spending less than you earn can put you ahead of your peers.

That says it all. My grandparents always lived within their means and they always had money. Not a lot, but they had money and they didn’t owe anybody. It’s a simple philosophy and it works.

(read the whole article)

As you can see, I am far from having my finances under control. I’m trying though.

 

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