By BILL SPANIEL
California Society Of CPAs
How would you grade yourself on your money habits? Would you go to the head of the class or end up with an ‘incomplete’? If you’d like to take some smart steps toward a better financial future, take this advice from the California Society of CPAs (CalCPA.org).
Focus On The Positive
Cutting back on spending may feel like a punishment, so right from the beginning, try to remember the many benefits it can offer. For example, you’re more likely to end each month with a little extra money that you can put toward something special, such as a vacation or new car. If you’ve been living off credit cards, getting your spending in check can help you lower your balances and the amount of interest that’s being drained from your pocket each month. Remind yourself of all you’ll gain, and the cutbacks won’t seem too bad.
Pay With Cash
It’s hard to overspend when you use cash for all of your daily needs. For one thing, it will prevent you from putting a little more than you intended on a credit card in the hopes you’ll figure out a way to pay for your overindulgence later. If this strategy is going to work, of course, it’s important to budget how much money you’ll carry with you each day and avoid dipping into an ATM when you run out of cash.
Pay As Much As You Can
Don’t stick to the minimum one percent to three percent of your balance that many credit cards require you to pay each month. Instead, pay down your outstanding balances as quickly as possible to avoid running up months or even years of interest. Look at it this way: Having that balance is costing you money, so do whatever you can to get rid of it.
Pay On Time
Late penalties are another unnecessary cost that you can avoid by tackling your bills promptly. Missing payment due dates can also lower your credit score, which could force you to pay higher interest on all your borrowings.
The best way to monitor and better understand your spending habits and needs is to write down everything you spend for a month. You may be in for some surprises about where your money is going, but the exercise will help you address bad habits. If you find that takeout or happy hours are costing a lot more than you thought, you can decide how to trim expenses that are draining your bank account.
Don’t Go Cold Turkey
Even as you become more budget conscious, don’t deprive yourself of fun entirely. Go out once a week instead of several times and have that special (but pricey) takeout coffee you love only on Fridays as a way to celebrate the end of the week. If you deny yourself all indulgences, there’s a better chance your good money management could go off track.
Don’t Forget About Saving
Are you putting off saving until you’ve got extra money to spend? It’s a better idea to include an amount for savings in your budget each month. Start small, if necessary. Your money will grow slowly but surely over time and will be there when you need an emergency fund or the cash you want for a dream goal.
Live Within Your Means
If you start out with a budget that includes your monthly income and expenses, it will be easy to see how much extra you have to spend.
Consult Your CPA
Trying to change your habits? Your CPA can offer expert advice and steps that will improve your financial outlook. Turn to him or her with all your financial questions. Visit CalCPA.org/findacpa to find one near you.
The Money Management columns are a joint effort of the AICPA and the California Society of CPAs as part of the profession’s nationwide 360 Degrees of Financial Literacy program.