Foundations of Finance

Most of my posts have to deal with personal budgeting ideas and how to make, keep, and succeed with a specific budget.  Many of these ideas include every day spending and how to save at the grocery store or in going out to eat…stuff like that.

However, I think one of the most important thing to remember when living your financial life, is that simple rule of provident living.  This weekend I listened to a speaker who emphasized this point, and I thought it was so good that I wanted touch on those things for a quick minute.

We all know that there are different classes of individuals based on a financial level.  There are the wealthy, middle class, lower class, and those living in poverty (and many other small levels in between).  A fundamental rule in finances is to live within your means.

Trying to keep up with the Jonses or the Smiths will put you in debt faster than you can say “money, money, money”.  Our neighbors (or the guy down the road) will always have something we want or think we should have to look as “prominent” as they look.

The key is to realize that, yes-that’s a pretty cool toy and a very nice house, boat, jet skis, cabin, etc.-but, you can’t afford it!  It’s hard for some people to distinguish between, “I want that”, and “I can afford that”.  Sometimes, even if you can afford it, you don’t actually need it, so why waste your money?

A lot of people fall into financial troubles because they purchase things that they can’t afford just to keep up with their friends, family, or neighbors.

My advice to you is to realize that you don’t need to keep up.  Having a cool toy is not worth going into extreme debt.  It never will be.   Live providently-live within your means.  After using some of these personal budgeting ideas, maybe you’ll eventually get to that point, but it’s essential to recognize when you are or are not in that situation.

My father has been sending me information about finances, budgeting, and investing for years. Luckily, the information he sends and the books he asks me to read have helped me become far more budget savvy then I would have been otherwise.

Yesterday he sent me a copy of an article that he thought was “a good reminder” of how to manage your money.  I thought I’d share a couple of the highlights from the article that I thought were pretty important points.

First, get serious about retirement.  The time to start investing is in your 20s.  Currently, I’m in my lateish 20s and have been investing for years.  It doesn’t matter exactly how much money you make.  The point is, you need to take at least a small (if not large) chunk of that money and start saving for your future life.

The fundamental needs of planning for a good retirement is to figure out when you want to retire, how much money you want to have saved for retirement, and how much you’ll need to start putting away to reach that goal.

If you wait too long to start saving for retirement, you could have a painful and frustrating time getting to the amount you want.  Plan ahead.  Budget out enough for your retirement (401K’s are great!) so that you can live comfortably when you get to that point in your life.

The second point that I particularly liked was to diversify your investments.  Along with putting aside retirement money in a specific (and safer) sector, you can-and should-invest in different types of investment pools.

Spreading your money out can help in more than one way.  You want to ensure that if you happen to lose money in one area of the market, that you have other investments that won’t lose at the same time.  And, once you start investing, don’t stop!

Continue to learn about different investment techniques and discover what works best for you.  There are tons of different types of investments.  Some may work out well for you, some may not.  But, keep trying.  Work at it, talk to your financial planner or broker so you get your money in the best investments.

There are all kinds of tips and suggestions available to you that can enable you to become smarter in your money management.  These are just a few of the things that can help!

I have a problem.  I love to shop online!  It’s seriously a disease.  I love looking at sales and specials to see if there’s anything that I just HAVE to have.  I promise i’m not a big time, walk around the mall for hours kind of girl.  Mostly I just want the clothes when I want them, and if they don’t fit, eh-i’ll just send them back.

I actually just bought two things last night from an online store.  But, how does this have anything to do with personal budgeting ideas?  I’ll tell you.

It is very easy to get a little out of control when it comes to online shopping.  It’s just exciting.  The appeal to me is that I don’t have to go walk around a crowded and annoying mall to get what I need.

Because of the obvious positive aspects of online shopping, some people may get a little too into it.  I have seen some people do a little too much online shopping.  Although you can buy a sweater or a pair of shoes with just the click of a button, you can also buy three pairs of shoes and two sweaters just as easily.  That’s where the distinction needs to be made.

It’s important to realize that, while you aren’t technically at a store, you are spending money and still need to stay within your budget.

The best way to do this is to decided before getting on the internet, what exactly you want and look for that.  No online shopping browsing.  That will always lead to some negative financial situation.  The other thing is, remember, you already have money set aside for clothes, so online purchases need to fit within (or count towards) that budget allocation.

The reason I bring this up as a personal budgeting tip is because I have gone overboard one or two times, so I know that it can happen.  It’s exciting when you’re putting it all on the card, but you have to realize that the card doesn’t mean “free”.

You have to pay for it!  Keep it within your budget and remember to decide what you need before you get on the internet for some shopping.