Whether you are content with your overall financial picture right now or not, nearly everyone has some room for improvement. When you live on a fixed income with very little wiggle room in your budget, you might feel as if there is not much you can do to improve your financial security, but you might be surprised. Here are some tips for taking control of your finances in 2019.
Step One: Make a Spending Diary
For a month or two, write down everything you buy, every bill you pay, every automatic payment that comes out of your bank account.
Tip: Rather than handwriting a spending diary, collecting receipts, or trying to remember each cup of coffee or newspaper, use your debit card instead of pocket money. When you’re ready to write up your expenses for the month, just go to your bank’s online account information, and the data you need will be right there.
Many people are surprised the first time they create a spending diary. As they say, the little things add up.
Step Two: Master Your Cash Flow
Much of the anxiety people have about money centers on cash flow. It is stressful if you do not know for sure that the money will be in the bank, when you need it to cover your bills.
Let’s say you receive your retirement benefits or paychecks in two parts each month – half at the first of the month and the other part in the middle of the month. If your bills are due in the first part of the month, you will not have enough money to pay them as they fall due, even if your total monthly income is enough to pay your expenses.
Step Three: Plan of Action
Make a list of every expense you have and the date that it is due. If you used your debit card instead of pocket money, just open your online bank account information and harvest the data from it. The items will already be in order by date. If you type this as a Word document, you can save it on your computer’s Desktop and check it every day to know that your cash flow is in good shape.
Group the expenses by pay period. For example, if you get your retirement or paycheck on the first of the month, write the amount of the net income you receive after taxes and all other withholdings. Under that net income number, list all of the expenses that will have to come out of the check, including the day of the month that you pay them.
Write the total dollar amount of expenses for that pay period. As you pay bills, subtract them from the total expenses, so you will know how much more you will have to spend on bills out of that check. You should also write the amount of money remaining in your bill-paying account (such as your checking account balance) and include that day’s date. At a glance, you will know if you have enough funds in your bill-paying account to pay your immediate and upcoming expenses.
Every month, before a paycheck arrives, type an asterisk (*) beside each line item expense for that pay period. As you pay an item, delete the asterisk. Update the total outstanding bills for that pay period and your bill-paying account balance daily or every few days.
Step Four: Even More Control Over Your Cash Flow
Laying out your running income and expenses like this takes some time, but if you save it on your computer, you will only have to set it up one time. You can use the document for years, just updating it when necessary.
Seeing everything on paper will help you decide, if you need to rearrange some of your expenses. If you have to pay your rent or mortgage on the first of the month, make phone calls to see if you can reschedule your other significant bills, like your car payment, utilities, and insurance to the second half of the month.
Of course, you should pay down debt – particularly high-interest credit cards – as soon as possible and build up a savings buffer. We all have emergencies, and it is easier to navigate difficult times like a medical crisis or job loss, if you have a little money saved up to see you through the experience.
Set up a weekly automatic transfer from your checking account to your savings. Even if you can only afford to transfer $25 a week, you will have $1,300 in just one year.
The regulations in your state might be different from the general law in this article, so be sure to talk with an elder law attorney in your area.
AARP. “6 Ways to Get Your Finances Ready for 2019.” (accessed January 8, 2019) https://www.aarp.org/money/budgeting-saving/info-2018/financial-advice-for-2019.html