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Financially Smart | XL Financial Blog

Ask Yourself: Are You Financially Smart?

Posted on 21. Nov, 2013 by in Financial Planning

The only way to know how much money you have and where it all goes is to keep a record.  Jot down every expense in a pocket notebook, and note every bit of income.  Then add it up monthly in one of a dozen categories: 1-Rent or mortgage; 2-Utiltities – including phone, electric, water, cable, web service, but not web subscriptions or apps that you pay for, those are entertainment; 3-Transportation – car payments, gas, oil, maintenance, vehicle insurance, or a bus pass; 4-Clothes – cleaning and repairs of the clothes you own and new purchases; 5-Food – only groceries, have a separate category for eating out; 6-Bills – such as student loans and credit card payments, if any; 7-Health and fitness – include costs of insurance premiums and co-pays, medications, as well as gym or yoga fees or whatever you do to stay healthy, such as a ski pass for example; 8-Savings and investment – whatever your age or status in life, figure ten percent at least; 9-Household – includes toiletries, household supplies or decorative items, etc.; 10-Entertainment – tickets to events, movies, plays, concerts, food or beverages out; 11-Miscellaneous – figure five percent, or so, for unaccountable items and this and that; 12-Customize a category for your unique expenses or hobbies in your life.  When you see what you spend, you can make wiser choices.

Are You Financially Smart Enough to Use Credit In Your Favor?

Spend with a credit card, but never spend more than what you can pay off before the end of the month.  You may get bonus points, and you will never pay interest or fees (avoid cards that have a yearly fee), as long as you always pay the balance before the end of the month.  And you develop your good credit rating with responsible use of credit, so it is a win-win.

When you have financed a home or a car, make payments on time as required, and when your budget allows, make an extra payment a month.  Even just twenty dollars in the last week of every month, after you have already made your payment for that month, will cut the payment time down dramatically, because that money goes directly to principle, paying off the balance you owe for the car or the house.

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