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Taking Control of Your Finances – Part I: Building Good Habits

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My Dad usually writes this article, but I’d like to follow up on his last article for graduates. As a college graduate of the last five years, I want to keep the summer trend going with information that recent graduates might find useful, though others may find this topic useful as well.

 

The best habit I’ve come across is to track everything I earn and spend on a spreadsheet. If someone were to ask you how much you spent on gas or food within the last month, would you be able to tell them? A few years ago, I certainly couldn’t without going to my bank statement.

 

Part of taking control of your finances is keeping track and knowing where your money goes. It’s more than just saving for retirement or vacation. Managing your finances is about having enough stored up to cover a rainy day or make a down payment on a new car without causing a panic. We’re going to take a look at some basic parts of the process pertaining to taking control of your finances with a permanent solution.

 

Managing money is one of those things that everyone does, but few do it well. It isn’t taught in school and “trial by fire” isn’t such a great approach. It’s easy to fall into the trap of, “I’ve just been paid and there’s money in my account,” or “I don’t need it, but I can afford it.” The worst financial mistake you can make, no matter how much money you have, is blowing a budget out of the water simply because you can.

 

So how do we go about tackling this problem and building a good habit in its place? The first step is to keep track of everything. There are multiple ways to do this, with software like YNAB or Mint, or even just with pen and paper. Your ultimate goal is to log what comes in and what goes out. You need an income column to record your paycheck(s), and an outgoing column to log expenses. Beginning with your next paycheck, (1) write down exactly how much you brought home, then (2) write down how much you spent every day and don’t skip anything. This only works well if you’re honest.

 

After a month, add everything up and see if you’re earning more than you’re spending. Are you cutting it close? You might be shocked by the results, but that’s alright. This is just a kick-off to developing good habits.

After your month is completed, look at the results. How did you do? Did you find that you had money left over, or were a little short and pushed up the credit card balance to make up the difference?

 

If you took the challenge and did the budget, send me an e-mail, ryan@communityfirsttrust.com. You don’t have to tell me anything about your income or your results, just “hey, I did the budget.” If you send me that e-mail, we will send you something in return (we techno’s are all about points and prizes!). We will not use your e-mail for any other purpose; this is just to reward anyone interested in making their life better and a little easier. We did this project in Boy Scouts when I was about 13, so you are never too young (or old) to improve the way you manage your money.

-Ryan Kerst

 

 

 

Bill Kerst President Community First Trust Company

Bill Kerst President
Community First Trust Company

 

 

 

Bill has been conducting educational seminars on IRAs, asset management, and trust management for over 15 years. He has served as the moderator for the Income Taxation of Estates and Trusts course offered by the Arkansas Society of CPA’s and provided many seminars to civic and church groups in the community.  For more information, call 501-520-3660.