Money Management Skills

Taking Control Of Your $$$$

Law 1: Budget Your Expenditures

Every family should have three budgets monthly, yearly and long-range. The long-range is to plan major purchases and commitments: buying homes, automobiles, major appliances, financing education and marriages of children, for example...
Shorter- term budget provide guidelines for everyday expenditures. Two common reasons budgets fail are that they are too complicated or that they are unrealistic. Three simple steps will help you overcome these problems.

First, analyze your expenditures to see where your money is going. Prepare a spreadsheet on computer or manually. Before writing on spreadsheet, list amounts spent for donations, savings, (pay yourself 10% each payday) home, utilities, gas, and other car expenses, clothes, food, etc.
This lets you know exactly how much you are spending in each area. Now you have information to make a realistic budget.
 

Second, separate fixed expenditures from a variable expenditures. The only time you have a choice in change in fixed expenditures is when you commit to them. On the other hand variable expenditures such as food, clothing, gas and other car expenses, and miscellaneous items can be adjusted.

Third, now budget variable expenditures. Make sure you subtract taxes and other withholding as well as fixed expenses from your monthly gross income before you begin. This residual amount will probably be much smaller than you thought, and you'll soon realize why you must budget and monitor your discretionary expenditures carefully. List all expenditures on spreadsheet.
 

Law 2- Save Some Money Every Month

Put aside for future expenses. You cannot be content because your lamp is full today; it may be empty tomorrow. A savings plan that is started early and added to consistently will accumulate to sizeable amounts in the future.

Law 3- Decrease Your Expectations

It becomes easy to think that you must have every convenience available. Two common rationalizations used to justify excessive spending are "If I don't buy it today, I won't ever be able to afford it" and "My neighbor has it, so I need it, too." Both of these justifications are messages from retailer, who are trying to sell their products, and from satan who is trying to get us into financial bondage.

Law 4- Stay Free From Debt

Many economist say that a future worldwide recession is inevitable. Even a small recession would bring defaults at all levels- international, national, and personal. Church leaders have counseled us to stay out of debt, except for homes, education, and vital investments. It is wise to purchase furniture, clothes, and other items with cash. Inflation and tax deductibility of interest often make debt look attractive. After 1990 taxes, no deduction is allowed for consumer interest paid. Note: When you borrow and pay interest you lose twice: the money you pay out in interest and the income that money could have earned for you if you had invested it.
Other types of debt can be equally troublesome. Equity loans fall into this category. They are easy to obtain. What the bank fails to mention is that if you borrow , you must make significant monthly payments; they also gloss over the fact that you are risking your home ownership by allowing a second mortgage. Exercise care when you borrow money, because once you are in debt, interest is your constant companion; it never rests, and it works on Sundays and holidays.

Law 5- Become Knowledgeable Consumers

Most people waste a certain amount of money. You either spend it for things you don't need or pay too much for items that you do need. After analyzing how you spend your money, work to improve your spending habits. You can save money by gaining expertise in the four basic areas of expenses: food, taxes, insurance and transportation.

Law 6- Teach Family Members Importance of Work & Managing $$

We work hard to give our children music lessons, swimming lessons, sports activities. Yet we rarely teach them money management skills. Children need to understand the financial pressures on a family. Children can contribute to the family welfare by helping control expenditures; for example earning expense money, saving money for future goals, turning off lights, etc.

Law 7- Make Wise Investments

If you have money to invest, you should recognize that every investment represents a trade-off between risk and return. If you have only small recourses, safe investments such as a savings account are probably the best.
The first investment you should make is a good home storage program. This helps to be panic-proof, knowing that you will be able to feed your family. A home is also an excellent investment. The home's value increases, yet house payments stay constant. Be cautious of investments that sound to good to be true; they probably are.

Law 8- Have A Will

No matter what your financial situation, have a currant will that will specify both how your assets will be distributed and who will be the guardian for your children.

Law 9- Keep Money In Perspective

While money management is important, it is not an end of itself. Money is like the carpenter's saw. It can build you the most beautiful castle or it can cut you up into a thousand financial pieces. You must learn to use it wisely in order to benefit from it.

Law 10- Analyze your budget And Know Your Net Worth

A Net Worth Statement tells you where you stand financially at any time. It shows the difference between your assets and your liabilities (debts) and is essential for retirement and investment planning. Here's how to figure it: First, as accurately as possible, fill in the actual dollar value of everything you own.* Then calculate your debts. Start with current bills. List all unpaid taxes, balances on charge cards, mortgages, loans, automobiles, etc. Finally, total the assets column, and then the liabilities column. Subtract your liabilities from your assets and the result is your net worth, as of right now. It's a good idea to review your net worth once a year or so when you plan to make a financial investment of some sort.

*The following list will help in calculating assets:
Checking Accounts, Savings Accounts, Money Market funds, CD's, Stocks/Bonds, Mutual funds, Real Estate, Residence, Income producing property, Cash-in value of life insurance, Pension/Annuities, IRA's, Personal Property, Home furnishings, Automobiles, Clothing, Jewelry, Antiques, Art Collections, etc.

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