Money Management

 

Although CFO 4 Your Biz primarily deals with businesses, we do advise individuals on a variety of topics. One question individuals ask us frequently is how can they manage their money better. Below are some generic money management suggestions. Please note, although these generalities apply to most people, each individual is different and they need to look at their specific situation to evaluate the best approach for them.

Living Pay Check to Pay Check

When the government shut down for over a month earlier this year, many people were not able to continue daily life without receiving their regular pay check. According to GoBankingRates, a surprising number of 57% Americans have less than $1,000 saved in a savings account.

It is suggested that you have at least three months worth of wages set aside in savings in case of a job loss, unexpected illness or tragedy. Ideally you should shoot for six months plus in savings, however having a large amount of money in your savings account does not happen over night. It requires proper planning, time, and self control to meet your savings goal.

Spending, Splurging & Saving

A common breakout on how you should be using your take home pay includes the 50/30/20 rule. 50% of your take home pay should be spent on the necessities to live. These are items such as housing, bills and groceries. 30% can be used toward entertainment, dinning out, or shopping. While 20% of your take home pay should be put aside in savings or paying off debt like student loans. If you stick to this rule, you will be surprised on how much money you put aside to savings and your ability to pay down debt.

Your Old Self’s Future

SAVING FOR RETIREMENT. If you went to college, this phrase has been drilled into your head so many times. Yet a remarkable 1 in 3 Americans have less than $5,000 saved for retirement, according to Northwestern Mutual’s 2018 Survey. And surprisingly many people under the age of 60 are cashing in on their retirement and paying huge fees and penalties when they do so.

As a generic rule of thumb, you should be setting aside at least 10% to your retirement account. Many employers offer retirement programs and will match your contribution up to a certain amount. If your employer matches 3%, and you contribute 7%, then you would meet the 10% goal. Knowing how much to save for retirement is always hard as it varies on many different factors.

Sticking to the Plan

Saving money is the last thing on most peoples mind, however it is critical to have money set aside for a variety of reasons. Reach out to people for help and make yourself accountable. Saving is like the snowball effect, you may not notice results right away, but after a few months or years, you will be surprised by how much you were able to accomplish and put aside if you stick to your goals.