Now that you’re an actual grown-up with a job, the first order of business is getting a handle on your day-to-day finances.
Sure, you’ll eventually want to think of bigger things, like investing in a 401(k), saving for a down payment on a house or wiping out those student loans. Those are all worthy goals. But mastering the money you have is a smart first step toward a bright financial future. You worked hard for that paycheck. It's time to make it work hard for you!
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Here are the three steps to getting there.
Step 1: Be ready for the road.
Having a budget is kind of like getting ready for a road trip. You fill the tank, program the GPS and set that travel mug filled with piping hot coffee in the holder. That’s because you know you’ll get more mileage from your tank of gas if you’re wide awake and know where you’re going.
Bring this mindset to your checking account, and you’ll have fewer problems making your paycheck last the pay period. Make a monthly plan, and at the start of each week, take 10 or so minutes to make sure you have everything you need so you can get through it.
If you enter the week aware and prepared, you’ll make better decisions around surprises and spontaneity. Make it a habit, and you’ll be ahead of the pack, because only one-third of people live by a spending budget. Whether a spreadsheet, app or notebook is your tool of choice, this habit will put you in the driver’s seat of your finances.
Step 2: Discover your balance: Does living by a budget mean saying goodbye to having fun? Absolutely not. But how do you know how much is too much?
One yardstick is the 50/30/20 rule. Here’s how your monthly spending should break down:
- 50 percent for necessities: Transportation, housing, groceries, clothing, student loan payments, utilities.
- 30 percent for wants: This can include entertainment, streaming services, Wi-Fi, hobbies, travel and dining out.
- 20 percent for savings: Keep plenty of cash for emergencies and irregular expenses.
If the first two categories exceed the recommended percentages, focus first on cost cutting. Maybe it’s time to get a roommate, or maybe you’re spending too much at the grocery store. On the other hand, are you struggling with savings? Automating your finances can help.
Of course, if your percentage of savings is on target or higher, good job!
Step 3: Hack your habits. It happens. Staying in control over our day-to-day spending can get away from us. Oftentimes, it’s something small, like too many trips through the drive-through or an evening of mindless online shopping.
Cold turkey is one strategy to get your habit in check. But experts say the key to lasting change is finding a reasonable replacement for the bad habit. For example, when you're hungry, instead of turning in to the drive-through, head home and make a sandwich — it takes just as much time. Find a workable solution, and reap the rewards of watching those savings accumulate.
As you make your way through this thing called life, Minnwest Bank has convenient mobile banking tools and hassle-free checking to help you manage your spending and pay the bills. Plus, our personal bankers are always just a phone call away.
