When you are just starting out, keeping track of your money requires some work and planning, but it will pay off (literally and figuratively!) in the long run.
Do you know as much about your finances as you think you do? How about a quiz based on these foundational questions offered up by Rock Star Finance:
- How much money do you have?
When you are young and still living with your parents, it isn’t as big of a deal as when you’re living on your own or with a spouse. You need to be aware of how much money you have in order to know how much you can realistically afford to spend.
- How much do you earn each month?
This is an important number to know when trying to find a place to live, buy food, support children or a spouse, etc. You need to make sure you can afford to pay your rent each month while still having money left over to spend on food and extracurricular activities.
- How much debt do you have?
If you or your significant other has debt, you both need to be honest about it and join forces to pay it off. Stop spending money you don’t have.
- How much money do you spend each month?
To avoid exceeding your spending budget, check on your finances a few times a month. You don’t want to unintentionally go over that limit and have to suffer the consequences later.
- How much do you spend each month on debt payments only?
It is a good idea to begin paying off college debt/loans as soon as you can because if you wait, you will face a debt pile-up from other things such as rent, insurance, car payments, etc.
- How much money are you saving each month?
If you save some money each month, you will more easily be able to pay unexpected expenses without issue while establishing excellent financial habits for future.
- How much is in your emergency fund?
Your emergency fund may start small, but getting into the practice of allocating money for a specific purpose like this will provide a nice safety cushion in case anything happens.
- What is your net worth?
When getting your first real job and purchasing a new place to live, you may have a low or even negative net worth. This is okay at the beginning, but over time, make sure to pay off your debt and that you’re earning enough to move toward the positive end of this spectrum.
- What’s your plan?
Review. Review. Review. You must make sure to revisit your numbers each month, watching trends and activity spikes, and stay on the same page with your spouse.
- How many months until you are debt free?
This magic number is the stuff of happy anticipation. Be realistic and don’t set yourself up for failure by too aggressive a schedule that will strain your operating budget.
Next time you consider going on a shopping spree, take a moment to rethink what you’re about to buy and consider saving that money instead. Is this purchase something you really need? If so, did you comparison shop first? When you think about the impact of today’s decision becoming tomorrow’s problem, you may make a different choice.
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