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Introduction

PodcastMoney. You have a whole lifetime to earn, save, invest, and spend it. Yet, in order to avoid costly mistakes and wasted time, you probably do not want to wait a lifetime before learning how to do any of these things well. This is your opportunity to learn how to make the most of every penny so you can achieve the financial independence you want – when you need it. This course will cover important financial topics, including:

  • Money Management
  • Buying a Vehicle
  • Checking and Savings Accounts
  • Credit Cards
  • Investing

 

Chapter 1: Money Management

Money management is the process of knowing where your money is going now and having a plan in place for where you want it to go in the future.

Setting goals
Goal setting is your chance to figure out what you really want to do with your money and to get what you want without having to borrow for it.

There are three basic types of goals: short-term (achievable in under a year), mid-term (achievable in one to five years), and long-term (achievable in five-plus years). Determine how much your goals will cost you and the dates you want them by. If you have multiple goals, you can either work toward them all at once or concentrate on one and then move to the next. You can use the Financial Goals Chart to list your goals.

How much do you need to put aside each month? For short- and mid-term goals, the calculation is simple: the price divided by the months you have to save equals how much you need to put aside each month. For long-term goals, you may want to factor in the interest you expect to earn on your savings. You can use a financial calculator to determine how much you need to put aside each month.

Budgeting
While the idea of budgeting may sound overwhelming, it’s just knowing what you have coming in and restricting what goes out. A well-designed budget allows you to make the most of your money – you will get rid of wasteful spending while having the money to pay for expenses that are really important to you.

To design a budget, you can use the old-fashioned system (pen and paper), a computer spreadsheet, or budgeting software. The method matters less than the result.

Begin with your income, as it will determine what you can afford to spend and save each month. Total up every net (already taxed) dollar you make in a month. Now move on to your expenses. When developing this section, you should have two columns to work with – a “current” column, for what you have been spending your money on, and a “proposed” column, for the changes you want to make. In the current column, list everything you spend your money on in a month. Include periodic expenses, such as birthday gifts, weekend trips, or concert tickets, as well. Just total what you think you spend in a year, and divide the number by 12 to get a monthly figure. Don’t forget to include money for savings – both for your goals and emergency, unexpected expenses.

Though everyone’s budget is different, there is one basic rule that applies to all – your expenses should never be more than your income. Total your expenses and subtract the sum from your net income. Are you over or under? If you find there is more going out than is coming in, it’s time to make changes. You can increase your income, decrease your expenses, or do both. Using the current column as a guide, consider each expense carefully. Which are wants? Which are needs? In the proposed column, decide where you want your dollars to go each month and what you can cut.

A budget is born. Make a commitment to follow it in the future. Otherwise, your budget is only a piece of paper. You may not be able to perfectly stick to it every single month, but do the best that you can.

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