Financial Skills - How to Budget & Balance Accounts
There was a resounding request for a few topics:How to open a bank account
How to budget & balance accounts
How to write checks and pay bills
And how to start saving for retirement
It seems some of the things we take for granted are, as a result, missing from what we teach kids.
Creating a Budget
You may have your own way to create a budget, and that's fine. In my experience, the easiest way to make a budget is as follows:
On a piece of paper, draw a line down the middle:
Spending BudgetCalculate your average monthly gross income and put that at the top of the page, then multiply it by.80 (for example, if you earned $1,000, you would end up with $800)
Fixed ExpensesWrite down all of your FIXED expense categories (i.e. phone bill, insurance, mortgage etc... ) and put them in one column on the left side of the page
Variable ExpensesNext write in the variable expense categories (i.e. food, gas, leisure, etc... ) and put them in another column on the right side of the page
Fill in all of your expenses
Net Budget after Fixed Expenses - Subtract fixed expenses from your spending budget If it's a positive number, you don't need to change anything If it's zero or a negative number, you should look for expenses that you can cut or lower
Budgeting
It's not shock that budgeting can be boring and tedious. I've personally never been excited to sit down and create my budgets, but it's something that creates wealth and pays off down the road.
So how do you get kids excited about it? How can you add a little glamour to something so dull and boring? Easy - make it a game with payoffs.
How to Invest and Why You Need a Plan
Why is a plan needed?The investment world is a harsh jungle, a world of murky waters where the smartest and the most organized survive and become successful while the rest are gobbled up. A written plan short circuits our normal response to something as emotional as money. It prevents us from resorting to our gut feelings and emotions. Instead of following the herd mentality that may prompt you to make unwise investment decisions, a plan will force you to stick to a rational strategy that is underpinned by fundamental investment principles. Some of the difficult emotions that you will have to overcome while investing include:
1) The fear of failure
2) The tendency to continue with a certain approach just because you started it
3) Personal matters such as relationship issues at home
When building wealth, preserving wealth, and passing it to the next generation is the formula for financial success it is surprising that less than 20% of Americans do have a written plan when it comes to investing and even retirement
By having an investment plan written down and actually following what it says, you will have dramatically increased your chances of winning and increasing the size of your nest egg or investment portfolio.
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