“If you’re not careful, life has a way of making financial decisions for you.” Now there’s some practical wisdom. It comes from yet another ECCU resource that you may want to check out if it feels like you don’t have a firm enough grip on your finances.
Still a bit reluctant to tackle the task of taking control of your finances? Here’s another bit of money management wisdom from award-winning syndicated personal finance columnist Liz Weston that might motivate you. She says that budgeting is key, and one deterrent to budgeting is overspending on your overhead. This occurs when too much of your income pays for basic expenses.
“People who spend too much on shelter (mortgage or rent) and transportation (car payments and attendant costs) in particular often find they can’t create a balanced budget,” Weston says. What’s an appropriate amount? She recommends keeping living essentials such as shelter, transportation, food, utilities, insurance and minimum loan payments to 50 percent or less of your after-tax income.
Back to that ECCU resource. One of the great things about it is that it can help you get off the proverbial dime by doing two simple things: Set good goals and come up with the right action steps to achieve them. It’s called 5 Steps for Creating Attainable Financial Goals, and here’s a brief look at the process it takes you through to get control of your finances:
- Start with long-term goals. What would you like to accomplish 5 or more years from now?
- Set mid-term goals. What needs to happen 1-5 years from now to put you on track to achieve your long-term goals?
- Set short-term goals. Focus on ambitious but attainable steps you can take this year to point you in the right direction.
- Make lifestyle changes. To meet your financial goals, you’ll probably need to change how you think about, save and earn money. List some steps that will help you meet your goals.
- Track your progress and reward yourself. Set some milestones in your short-term goals and find ways to celebrate achieving them.
Each step includes a practical example of what it looks like and a chart or list to record things like goals, dates, amounts and action steps. For instance, a long-term goal could be “Contribute to your child’s college fund,” while a short-term one could be “Save $1,000 for emergency expenses.” As for tracking progress and rewarding yourself, a suggestion is to treat yourself to a movie or meal when you hit the $500 mark.
There’s one vitally important step, though, to setting these goals and taking control of your money.