by Michael Corthell
Money. Currency, a medium of exchange. Your level of 'wealth' can have very little to do with your yearly salary. People earning millions of dollars a year can, (and many do), have a net zero bank (asset) balance. On the other hand, people earning $35,000 a year can be quite well off, with more than enough savings to get them through a long period of unemployment.(see: Going Minimal) It's not so much how much you earn, it's how you manage what you have and how much you spend. You can be very rich with very little income.
Budgeting your money doesn't have to mean filling up a huge spreadsheet or buying a fancy calculator. Here are a few simple money management steps you can take to track your flow of cash and payments.
In this brief article I am outlining the 'envelope method' only. It's one of the simplest money management methods around and therefore one of the best. It will help you avoid spending more than you are able to and will help you understand where your money goes.
The first step: Create a budget. This means figuring out how much money you have coming in from all sources and then determining what you need to spend in all cost of living categories such as rent, food and clothing etc. per week, month or year.
The write it all down, create a 'spending log'. The goes hand in hand with budgeting and it is keeping track of everything that you spend. And there's a simple way to do that—all it takes is paper and pen. Simply write down everything you spend and what you spend it on. Write everything as you are buying it or keep all receipts and note the details down all at once when you get home. Your goal is to see where your money goes and flows. This method will train you and give you a realistic idea of how much you are spending, which is essential in creating a realistic budget.
Lastly, separate 'needs' from 'wants'. There are things that we all need like housing and food. Other things like entertainment and vacations are simply 'wants'. Separating these two will help you to understand how much money you have so that you don't overspend. First, how much does it cost for you basics, that is, your needs? This is fairly easy, because most of the costs are fixed or have very little variability. Some costs, like food, you will have to estimate. Remember to overestimate rather than underestimate.
This was a bare-bones outline, of course but all higher skills start with basic knowledge. What simple money management requires most is your discipline and due diligence. Even if you move on to a computerized accounting program like QuickBooks (which I highly recommend) you will still need your focused, self-discipline self to manage your money and assets effectively. I also recommend EveryDollar.
Managing your money well, is managing to have enough.
Personal finance education in high school
by Tanvee Patankar
When Tanvee was in 8th grade, she presented her idea to her schools TED-Ed club. She asked the question, "Why don't schools teach our youth how to properly manage their finances?" It is a simple concept, but one that most schools in the United States don't address.
Tanvee Patankar is a Freshman at Stevenson High School in Lincolnshire, Illinois. For almost 2 years, she has been on a mission to change curriculum standards in Illinois to include a course relating to student finances.