April is National Financial Literacy Month. All month long, YES! Columbus is bringing you content to bolster your financial education to help you achieve economic empowerment.
From a young age, we’re told that talking about money is “taboo” and, as women, we tend to be more careful to offend than our male counterparts. This means that conversations around finances gets obstructed more in our social circles, which hinders our education around the topic, and ultimately deprioritizes money all together.
This is a huge mistake, and one that is costing women greatly. The first step toward financial empowerment is having a budget. Here are five reasons to set up your budget and take control of your finances right now:
- Money is power, we’ve all heard it before. Having control of your money is the same as having control of your life. Think about it, how many times have you been stressed about a work issue (for example), only to have that worry compound when you layer in the thought of the size of your credit card bill? Money influences everything you do, and is the not-so-subtle underlying factor of your overall happiness. Getting control of your money is the same as getting control of your life.
- Setting up your budget forces you to be educated about your spending. The first step in financial empowerment is LEARNING about MONEY! But you have to start at the beginning. Take one look at your prior month’s bank statement — I bet you’ll have no idea you spent that much on groceries, shoes, coffee… whatever! You need to fully understand your spending and your income before anything else.
- Once you understand your personal money situation, you can start living within your means. This doesn’t happen overnight! Many of us are caught in a cycle of overspending, and then catching up. But this is causing us emotional stress, and also causing unnecessary dollars to fly out the door. The next time time you pay interest on your credit card, or pay a late fee on an electric bill, or overspend on a night out, try this: Visualize yourself getting off your couch, putting on your shoes, getting in your car, driving to the ATM, withdrawing that exact amount of cash, coming home, pulling out some matches, and lighting that cash on fire in your kitchen sink. Not a fun exercise… am I right?! But that’s exactly what you’re doing when your finances aren’t in order.
- While you may have been able to live with the notion of paying credit card interest in the past, hopefully this next point will change our mind. Burning your cash in your kitchen sink (using our above metaphor) isn’t just losing you the money you have, you’re also greatly contributing to your own opportunity costs. What is opportunity cost? Take this example: let’s say you spent $40 per month, on average, on credit card interest in 2019. This amounts to $480 for the year. If you had instead saved that cash and invested it in the U.S. stock market at the beginning of 2020, you would have almost $630 today. That’s in ONE year, and during a pandemic and a recession, no less! Imagine this scenario playing out across all of your unnecessary expenses, and investing those funds over multiple years! Your savings would be in the thousands, not hundreds. Your unnecessary spending is hindering your opportunity in more ways than one.
- Once you’ve built up your savings and started capitalizing on the financial opportunity available to you, you’re unstoppable. Now, your money is working for you… instead of the other way around. The emotional and physical freedom that comes from financial empowerment is addicting, and you will be hooked once you’re there. You just have to get started!
Now that you’re motivated to become the badass, money-saving go-getter you know you can be, it’s time to get to work. Setting up a budget is a very personal process that requires you to find a method that works for you. It’s unlikely that the first link below will be the right solution for you, so keep searching around until you find something that feels right.
A few budgeting resources:
- Apps like Mint and You Need a Budget make budgeting simple and come highly rated. Just be forewarned, to access their full spectrum of services you will have to pay a monthly fee. If you need extra help getting set up, these apps might be the solution for you. But remember, budgeting is about learning. So don’t take the easy way out just because you can pay for it! Use these solutions only if you need the extra support.
- Sometimes, the simplest way to learn to budget is just to start with a good ole spreadsheet! Nerdwallet put together this comprehensive list of options, which even has resources available through google sheets (so you can share them with your partner, if applicable). The “One Number” spreadsheet by Julie Ford is another one you could check out. It’s incredibly intuitive to use and really delivers on helping you understand your money.
- You may be in a situation where you need to pay down debt before you can start turning your financial life on its head. Again, there are a lot of programs out there to help. You will hear criticism about them all, but the only thing that matters is that you find one that resonates with you and that you can stick with. The two most popular debt reduction methods are the Snowball method and the Avalanche method.
Remember, the ultimate goal in setting up a budget is to:
Understand your income and spending….
…So that you can start living within your means…
…So that you can begin to thrive and achieve financial empowerment!
Our next post will cover how to get started investing! Investing is for everyone (we mean it!), and it’s simple to do. Stay tuned!