Know Your Money
Practical knowledge of money helps your whole life
The best place to start is with an all around goal for the rest of your life. Always have more money coming in than going out! Know your money “period”.
I read hundreds of articles and posts every week and there is an entire billion dollar industry structured for you to know your money. For instance you can find out how to valuate stocks and your portfolio. You can find out how to save on car insurance, you can even get the basics to financial well being in the form of a book. Know Your Money is a popular topic.
Simple Basics
If you make $2,000 per month that is not the amount you have to spend. You can only spend what you take home. To know your money, you must understand taxes. Basically you will have $1,440 in take home pay after taxing the $2,000. So do you know your money? You really only made $1,440; therefore, you can only spend $1,440!
This is where people understand but rarely do they act accordingly. That new pair of shoes, dinner out (several times per week), car wash, rent, etc. all evaporate that $1,440 very quickly. If you know your money, then you are probably on a budget. What’s a budget – it’s a simple plan.
Here’s how you budget when you know your money: Take home pay – expenses should be greater than or equal to ZERO.
You need to define your budget into two different expense types: fixed and variable, but you also need to know your money and decide what is mandatory and what is discretionary.
Fixed costs are rent, loan payments, insurance and things that are specfically basic needs. The way to control them is before you sign for them. You can rent a cheaper apartment, you can own an older car, etc. – when you know your money, you’ll realize that shiney and new is very expensive!
Your variable costs are utilities (unless included in the rent), clothing allowance, gasoline, auto maintenance, etc. These must be paid and are also a part of the mandatory class.
The discretionary costs are food, entertainment, vacation, gifts and shiney things. Don’t fall into the advertisement trap of using your card to get you what you want right now. If you know your money then you will understand that the card trap costs you far more in the future than the immediate value that you gain.
Remember the budget equation? Budget = Take Home Pay – (Fixed Costs + Variable Costs) and Take Home Pay >= Expenses! That’s how you know your money. Make those two equations work and your going to be rich in the future, not immediately unless you have really come up with something.
Most of the time you end up reading this site because you are having some money troubles. Search the site and discover how it is actually my answer to solving money problems and how it can become your model for solving your money problems. Know your money and learn to live well.
