I run the finances in our household. Not because my husband can’t, ironically he’s in finance, but because it gives me confidence in our spending and our life decisions. There is power in knowing where you are spending and where you are saving, which is why I like being in charge. That and I’m obsessed with organization and a control freak, but that’s beside the point. Keeping up with your money is what you need to gain financial confidence.
Teaching Your Kids Finances
I learned about financial responsibility young. From the time I was in elementary school, my parents made a deal with all the kids. Whatever money we put into a savings account they would double. However, we weren’t allowed to touch that money until college. This meant that parts of birthday money, babysitting money, lemonade stands and so on would go into the savings account, doubled by mom and dad, and for all intents and purposes never be seen again. At least that’s what it felt like.
But the money grew over the years and by the time we went to college we had a few thousand dollars saved up. Enough to make an impact when it came to buying books and paying for rent, which was also our responsibility.
How Much Savings Should You Have?
What I see a lot of our friends going through, is spending money as soon as they get it. While we totally understand the fun of that, what the year 2020 has taught us is that you NEVER know what’s going to happen. (Perhaps a pandemic!) With that in mind, you should always have enough money in the bank account to take care of you for at least 3 months, 6 if possible. This means that if you have $0 coming in for 6 months, you’d have enough to survive. Having a safety net like this will provide you space if you should happen to lose your job. With 3 months wiggle room, you have time to find a new job without the stress of becoming homeless or not having enough money to eat.
How To Start Saving
Okay, you get it. Having some money in the bank makes sense and you’re ready to gain more confidence by making sure you’re financially secure. So where do you start? Well, my dear, I start by tracking my spending now. I use Mint, a free app to track all my spending all month long. By paying for things on credit cards (all paid off at the end of the month. I only use to get the miles for free plane tickets later) or debit cards it easily tracks all your purchases and puts them into categories. At the end of each month, you can see where you’ve been spending the majority of your money and how much went where. You can even customize categories and tags to stay better organized.
When the month is over I open up a Google Sheet where I track all the numbers so I can easily see trends month over month. This sheet breaks down my spending by category, tracks our income from both our day jobs (W-2 income), and my freelance work (1099 income) and I record any spending for my business to give to our accountant at the end of the year. If you’d like to try out this sheet with all the calculations built-in, you can download it here.
By knowing where you are spending you can see where you can and should cut back. If you see that your groceries are super high, then it might be time to go to the store with a shopping list you stick to. If you spend all your money on bars and restaurants then maybe you need to set a budget. (You can even set budgets in the Mint app and it will notify you when you go over.)
The Cash Cure
If budgets aren’t your thing and you just fly past the amount you would like to spend then this is the trick that was built for you. Only carry cash. My grandmother had envelopes of cash throughout her house with labels on them for what she could spend them on. Groceries, gas, dry cleaning, etc. were all covered. So if you really have a hard time not spending, then leave your cards at home and stick with cash. That means setting a budget for the week or month and going to the bank to get just enough cash out to match your budget.
Of course, you can always go and get more, but it’s an inconvenience which means in most cases you won’t.
I believe that having full control of your finances is the best way to gain confidence in general. To know what you can and can’t spend money on, to have savings goals to pay off debt, or go on a big trip are great motivators for working hard. Darling, knowing that you will be taken care of if you lose your job, having the goal of saving for something big, and understanding where your hard-earned money goes will give you the confidence you never had. You’re so close to having financial confidence, it just takes 1 step.
Leave a comment below with any other financial tips you have or questions on how you can better own your financials!