We’re getting questions from some of our subscribers on how do I create “practical money skills”? Here are a few thoughts on things to think about if you’ve never had a plan for your money.
Today we’ll chat about three key ways to improve your money skills. Here are three challenges that people may face. Do you have one (or more) of these?
- No money goal (lets set a goal for your money)
- You live without a money plan (lets create a money process)
- You don’t have a simple budget (lets create a simple, easy to follow budget)
Let’s chat about each one….
Developing Money Goal(s)
You work every day (or almost every day). Provide food. Have fun. But are you living day to day? I’ve always found that having goals that I need to strive for serves as the foundation for how I manage — the same goes for money. What are your money goals?
Two ways to do this:
- Flat out goals. (ie not short / long term)
- Short and Long Term Goals.
What Mrs. YourFinances and I do is set both short and long term goals. These are financial goals that we use to set up our money processes and budget. For example:
- Short Term Goals: Vacation to DisneyLand in two years. Buy a car in 3 years. Ensure we have sufficient emergency funds. Ensure we can meet our budget.
- Long Term Money Goals: Save for retirement. Save for college. Buy a mansion (just kidding).
Creating a Simple Budget
Its very easy to start with a simple budget (click the link for our blog article telling you just how to do this). In short, to create a budget you need to understand your required versus nice-to-have expenses. For example, a required expense would be food to cook for yourself or your family while a nice-to-have would be going to a restaurant. To start, create an inventory of all of your expenses (or spends) over a week or two. And categorize them into two categories (nice to have / required). This gives you the current situation.
Then delve into your goals. How can you meet your goals with your income and budget. then its just a numbers game. Adding here, subtracting there. You may find that there are some nice to have expenses that you cannot do at all (or maybe just not as often).
Crafting a Money Process
We created a simple budget and follow it. There are many tools to use depending on what works for you. Yes it must work for you! You may need to try one to see if its easy to follow, if not try another method. There are a variety of online apps for your phone that you can use.
Three examples of budgeting apps are:
- Mint (this is very popular)
- Every Dollar
You can also use just a spreadsheet. The key thing is that you must have a process that you follow where you can enter your goals. Track your budget. And track your progress.
A Great Path To Practical Money Skills
Practical money skills are things that you gain over time. You create the processes and habits to create a great future …. one step at a time. You can do it!
Do you have examples you can share with us (in the comments below)?