It’s only been 50 years since women were allowed to get their own credit card. We’ve come a long way in terms of finance, but we’re still lagging behind when it comes to equal wages. While that’s another topic for another day, one thing we can do in the here and now is to take control of our spending, create a budget, and be smart with our money. It’s not easy. Let me repeat: it is not easy, especially not when a super-cute pair of jeans is calling your name. But it’s absolutely worth it.
Find a good bank. Ideally, you’ll put your money in a bank that has a high interest rate on your savings account (make money on your money!) and doesn’t have any requirements to use it – no ATM fees, no minimum balance, nothing. Best of luck finding that. These days, almost all banks have some kind of tricky fees or strict rules. At my bank, almost all of the accounts require a minimum balance of $100 – or they’ll charge you. Similarly, you are charged $35 every time you overdraw your account. Yes, they will penalize you even in your darkest moments, when your account is so low that you have a negative balance. Find a bank with rules that work for you (or the one with restrictions that suck the least).
Watch your accounts closely! With online banking, it’s so tempting to just think you don’t have to check on your expenses. But you can’t always rely on the balance that shows up. Sometimes checks haven’t cleared or charges haven’t yet gone through. Also, identity theft is a real thing and with how frequently we buy items online, things happen. Keep a close watch on your balance just so you can be aware if anything strange happens.
Discuss finances with your significant other early, and often. There is no excuse for this. Yes, talking about money can be awkward and annoying, but it’s better to know that your partner has $10,000 in credit card debt (I’m looking at you, Lily on “How I Met Your Mother”).
Don’t do anything with your money that makes you uncomfortable. Everyone is going to have an opinion on the “right” way for partners to deal with their finances. Don’t listen to them. You have to do what feels right for you. Early on, I would recommend keeping your finances entirely separate, but still being honest about it. Bill and I would take turns paying for things like dinners out, trips to the movies, and dates – especially after we’d been dating for a while. When we moved in together, we got a joint savings and checking account in order to make paying shared expenses easier. However, we also kept separate checking and savings accounts so we also felt like we had our “own” money. It made me feel way less guilty to spend $200 on clothes if it was coming from my own account. That works for us. Talk about what will work for you.
Budgeting and spending
Write out all of your expenses versus your income. I can’t tell you how important budgeting is, whether you’re with someone or just on your own. You need to know how much money you’re making versus how much you’re spending. We all often remember big expenses, like rent, student loan payments, and cell phone bills, but “smaller” expenses add up, too – a Starbucks coffee here, a quick run to Target for some odds and ends there. It may feel intimidating, but there are plenty of free resources to get you started (here or here, to begin).
Figure out what you can afford. Before you make any large purchases, whether an apartment, a car, or a home, you should know what you can and can’t afford. For example, you should not be spending more than 30% of your income on rent each month, if you can help it. If you make $33,000 a year, that’s around $825 per month. Getting an apartment that costs you $1,500 a month, then, would not be very wise.
Overestimate your bills; underestimate your income. It’s always better to have a bit of a cushion in your account than to plan to the cent. While some bills are fixed, others fluctuate, and sometimes by a lot. You’ll need to make a rough estimate when you’re planning your budget, and I’d recommend overestimating those costs by quite a bit. Remember, if you overdraw your account, it’ll cost you.
Be honest. It can be tempting to try to create an “ideal” budget. But if you’re spending $50 a week on dinner out with friends, and you don’t want to factor that in to your budget, you’ll run into an issue. (Unpaid bills, a really high credit card balance, or friends who are super annoyed they have to treat you to dinner for the fourth time that month.)
Know where your “weaknesses” are and allot for that – or reign it in. In an ideal world, I would only buy new shoes once a year. But that isn’t how my life works. I need plenty of wiggle room for spending purposes, and I know that, so I make room for it in my budget. If I have money I feel like I can spend, I tend to do so – in order to save, then, what’s left of my check (after expenses) goes directly into my savings, leaving me with only a little bit of spending money every two weeks. I consider my savings accounts off limits. Things feel tight, sure, but it makes me re-evaluate my purchases.
Use your credit card as little as possible. I mean it! And when you do use it, pay it on time, and pay as much as you can. If you can pay it in full, even better. That line about carrying over a balance in order to improve your credit score? Myth.
Track your spending. When you’re using credit/debit cards, and even PayPal, money changes hands so often it’s easy to lose track. For some, using cash helps keep spending in check. Personally, I like Mint.com, which is 100% free, and allows you to connect your credit cards and banking accounts.
Keep a piggy bank for your spare change. Most of us don’t even bother with cash anymore, but sometimes you will use that strange green stuff called “money” and you will get change. Rather than letting it get lost in the bottom of your purse, toss it into some kind of savings bank. Mine is in the shape of an elephant. When it’s full, depending on the size, you could easily have $50 in there.
Be frugal. I love spending money, but I also love saving money. I know – two competing concepts. As much as I like having things, if I can pay less for those things, I’m extremely happy. I try to find bargains when I can, so sometimes that means shopping around. On a whole, Amazon.com, Target, and Walmart, tend to have pretty decent bargains on household “basics.” I’d also highly recommend checking out your local dollar store. Not Family Dollar, where literally nothing is available for $1, but the good ol’ $1 shop. In Connecticut, that’s The Dollar Tree. It is amaaaazing! I’ve gotten everything from muffin tins to cleaning products to gifts (you can make a mean gift basket with stuff from the dollar store) here. This blog has an awesome breakdown of things to snag and avoid at the dollar store.
Just save. Now, tomorrow, next week, and forever. Even a little bit is better than none. In fact, your savings should be factored into your budget, and it should be thought of as a necessity. Not everyone will have this luxury, but if you can save even $20 each paycheck, that will add up. $20 every two weeks breaks down to roughly five Starbucks coffees. Or, a fun/creative way to get your feet wet in money-saving is to do the 52 Week Money Challenge – each week, you set aside a different amount of money, beginning with $1 and going all the way up to $52. Your account balance starts small – with only $1. But by the end of the year, you’d have saved $1,378.
For my final 25 to Life series, I’ll talk about some general life tips I’ve learned. Until then, do you have any money and finance tips?
25 to Life is an ongoing column that chronicles Crystal’s life as she prepares to turn 25. See her previous columns here.