Know Thy Finances

The first step to financial success lies in knowing your
financial situation at any given time. There is an anecdote
attributed to John D. Rockefeller--that as a child he was
given a monthly allowance from his parents, but upon stipulation
that he had to save 10% of it, give away 10% to charity, and
account for the rest of it. While his parents required that he
record down to the penny where he spent it--you can be a bit
more lenient on yourself!

Track your spending for 1-2 full months

Use a program like Quicken to keep track of all your personal
finances. I recommend the latest version of Quicken or a
similar financial program if you already own one. You should
start out by entering in your present-day personal checking
account, savings, investments, and cash situation.

To complete this step, you will also need a cheap plastic
filing container or something similar. You can purchase these
for about $15 at Office Depot, etc. As you make payments, keep
track of all the receipts you receive, the checks you
write, and any other monetary transactions you make. Like I
mentioned earlier, you don't need to be exact when it comes to
cash--just try to be, as much as you can tolerate.

At some later time, at your leisure, enter all this
transaction data into Quicken. As you do so, put the purchasing
receipts into the file folder under the appropriate
Category. Make separate labels for each of the file folders--
I suggest some of the following:

1. Personal
2. Household
3. Charitable
4. Books & Education
5. Dining Out
6. Business Expenses
7. Taxes
8. Misc.

You can also add your own categories or remove some as
appropriate. At this point, you may be wondering why you have
to do all this. For the moment, just trust me that it will be
beneficial to you (I will explain it later on). Also, it takes
a grand total of about 10-15 minutes per week to do what I just
described. The next section, Budgeting, will take a
little longer. But budgeting also requires that you need to at
least perform the first step mentioned above, that is, keeping
track of what you currently spend.

Planning your Budget

I can already hear what you are going to say--oh no, not a
budget! I don't like them either, because they tend to reign
in my emotional spending or "I gotta have it" mentality. The
truth is, you are the master of your financial destiny (not to
sound corny, but its true for the most part). If you want
to buy that fancy knickknack with the wireless PDA
attachment downloader, then by all means, get it. But if it
doesn't serve your needs in the long run, then you will have
wasted $X dollars to serve your fleeting emotional desires.
Besides, you will notice after tracking your budget for several
months where the real money is flowing. You might buy a fancy
computer toy only occasionally, at $200+ dollars, but eating out
at lunch everyday + dinner with the girlfriend at fancy
restaurants all the time is leaving you broke. How about
going to bars? I like to drink, but a beer at a bar or
nightclub can range from $4-$10. It's probably even more if
you live in areas like San Francisco or New York.

Anyway, the point of planning your budget is just to get a
better grasp on directing the flow of your money. I'm not
saying that you should totally change your lifestyle or even
change it at all--but if you are complaining about not having
enough then there are certain things you should do, mainly
spend less. It will be described later the benefits of
saving & investing your money (which you probably already know
anecdotally, but perhaps do not have extensive experience
personally).

Good Luck!

Sean Bradford

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Next: Make a Budget to Help Your Dreams Come True!

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02/27/2001

My credit union offers a VISA debit card. It does everything a credit card can do, except get us into debt. We can pay bills by telephone, we can order by mail or online, pay for clothes or groceries, whatever. It looks just like a credit card, too, so there is no more need to be embarrassed using it than using a credit card. I don't know if we would get any kind of frequent flyer advantage, but I prefer knowing we CAN'T run up debt. - RB

02/23/2001

For years my husband and I have used this plan which works well for us.

First, we use our "United frequent flyer Visa Card, to earn free tickets or upgrades for every dollar spent as well as miles flown.
While we pay a yearly $60.00 fee it is worth it to us. We charge just about everything, any place that accepts Visa ... airline tickets, car rental, hotel/motel, groceries, utilities, telephone (some do), doctor/dentist, car repairs, tuition's, restaurants, replacement appliances, entertainment, etc., nothing more than we would have spent using checks or cash.

Tip: You can telephone companies to pay monthly bills using your Visa, thereby saving on postage.

Secondly, we handle each charge with the thought in mind that the bill must be paid-in-full each month. Our thinking is, it is the same as spending cash but with a paper trail of receipts. There is no interest to pay when paid each month.

Thirdly, all money is (direct or indirectly) deposited into the checking account. For "pocket cash" we write a check and cash it ... you have a record of how much out-of-pocket expense you incur. The money is in the bank to pay the bill when it arrives.

The bill averages out each month with normal expenses, but there are times when unexpected things come up, and you can make a mental note of this so you are not surprised when the bill comes in.

When the bill comes in you can check the charges and total the various categories of charges so you can see exactly where your money is going.

If you can control your spending and are not a credit card addict, this can work. A second credit card (with no fees attached) can be useful in case you make a purchase you don't want to pay off at the end of the month. Remember, if you don't pay the entire balance, you pay interest on the entire amount owed plus the new charges ... EXPENSIVE!

Syd Barr, Dunkirk, MD