Just starting out? Raising a family? Getting ready to retire? Whatever your age, follow our moves for tending your finances and you'll reap big rewards.
PLANT THE SEEDS
Get Off to a Strong Start
Wealth may seem a far-off prospect when you’re in your twenties. But the personal finance habits you establish now will help you manage (and accumulate) money in the years ahead.
Know where the money goes. By creating a budget, you earmark for spending money that you’ve already made, not what you expect to make, says Philip Olson, a certified financial planner (CFP) in Austin, Texas. You also set priorities. Track your spending using a spreadsheet or a budgeting tool (see “Budgeting Made Easy,” on page 41), breaking your monthly expenses into a few categories (such as housing, entertainment, debts and savings). Then impose limits based on your spending history and monthly income. If you bust the limit on one category (or fall short on saving), you’ll have to pull money from another. Be realistic: If the limits are overly ambitious, the budget won’t stick.
If you’d rather keep things simple, forget about categories. Cristina Guglielmetti, a CFP in New York City, recommends calculating an overall cap for your variable monthly expenses, including food, entertainment and bills that you could reduce if need be (such as clothing or your cell-phone plan). To come up with your variable expense cap, subtract from your monthly income all fixed expenses— rent, utilities, debt payments, and savings for your emergency fund or future goals. Use a rewards credit card for the variable charges. That way you can easily track spending, set up alerts when you’re nearing your cap, and earn some cash back in the process.
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