LEARN HOW TO MANAGE AND HANDLE YOUR FINANCES

Personal financial management is a subject that is not taught in many schools, but is something that nearly everyone has to deal with in their lives later on. Here are some statistics: Some 58% of Americans do not have a retirement plan in place for how they'll manage their finances when they get old.^[1] While people generally believe they'll need about $300,000 to support themselves in retirement, the average American has only about $25,000 saved at the time of retirement.^[2] Average household credit card debt among Americans now stands at a distressing $15,204.^[3] If these facts are alarming to you, and you want to reverse the trend, read on for specific, targeted advice geared towards giving you a better future.

Part 1 of 4: Make a Budget

1. 
   1
   For one month, keep track of all your expenses. You don't have to limit yourself; just get an idea of what you spend money on during any given month. Save all your receipts, make note of how much cash you need versus how much you expense to credit cards, and figure out how much money you have left over when the calendar turns.
2. 
   2
   After the first month, take stock of what you spent. Don't write down what youwished you had spent; write down what you actually spent. Categorize your purchases in a way that makes sense to you. A simple list of your monthly expenses might look something like this:
   

   • Monthly income: $3,000
   • Expenses:
     • Rent/mortgage: $800
     • Household bills (utilities/electric/cable): $125
     • Groceries: $300
     • Dining out: $125
     • Gas: $100
     • Emergency medical: $200
     • Discretionary: $400
     • Savings: $900
3. 
   3
   Now, write down your actual budget. Based on the month of actual expenses — and your own knowledge of your spending history — budget out how much of your income you want to allocate to each category every month. If desired, use an online budgeting platform, such as Mint.com, to help you manage your budget.
   

   • In your budget, make separate columns for projected budget and actual budget. Your projected budget is how much you intend to spend on a category; this should stay the same from month to month and be calculated at the beginning of the month. Your actual budget is how much you end up spending; it fluctuates from month to month and is calculated at the end of the month.
   • Many people leave significant room in their budget for savings. You don't have to structure your budget to include savings, but it's generally thought of as a smart idea. Professional financial planners advise their clients to set aside at least 10% to 15% of their total earnings for savings.^[4][5]
4. 
   4
   Be honest with yourself about your budget. It's your money — there's really no sense in lying to yourself about how much you're going to spend when making a budget. The only person you hurt when doing this is yourself. On the other hand, if you have no idea how you spend your money, your budget may take a few months to solidify. In the meantime, don't put down any hard numbers until you can get realistic with yourself.
   

   • For example, if you have $500 dollars allocated to savings every month, but know that it'll consistently be a stretch in order to meet that goal, don't put it down. Put down a number that's realistic. Then, go back to your budget and see if you can't tweak it to loosen up cash somewhere else, and then funnel it into your savings.
5. 
   5
   Keep track of your budget over time. The hard part of a budget is that your expenses may change from month to month. The great part of a budget is that you'll have kept track of those changes, giving you an accurate idea of where your money went during the year.
   

   • Setting a budget will open your eyes to how much money you spend, if they haven't been opened already. Many people, after setting a budget, realize that they spend money on pretty petty things. This knowledge allows them to adjust their spending habits and put the money towards more meaningful areas.
   • Plan for the unexpected. Setting a budget will also teach you that you never know when you'll have to pay for something unexpected — but that the unexpected will come to be expected. You obviously don't plan on your car breaking down, or your child needing medical attention, but it pays to expect these contingencies to happen, and to be prepared for them financially when they come.

   
   
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