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Karen Poff

Personal finance foundations

If you want to build stability into your personal finances, you have to start with a firm foundation. The first step is to get organized. You'll need a simple home filing system, a way to keep track of which bills are due when, and one place to store everything. You can use large envelopes, file folders, notebooks, or calendars to organize. The best system is the one that works for you! But spending some time thinking about how to keep track of everything will help you stay on track with your finances. Speaking of keeping track...

The second step is to track all of your expenses. Either write your expenses down or keep all of your receipts for at least 30 days to find out where your money is going. Don't forget the snack you got from the snack machine, the mug you bought at the yard sale, or anything else you might not have a receipt for. Divide your expenses into categories, add them all up, and multiply by 12 to find out what you are spending each year. You'll quickly see places where your spending is not in line with the things that are important to you. Speaking of things that are important to you...

The third step is to set specific, measurable goals. Instead of, "I want to reduce my debt," try something like, "In the next year, I want to pay off three of my credit card accounts totaling approximately $1,200." The more specific goal can be broken down to be more manageable. The $1,200 divided by 12 months equals $100 per month, which is an amount that you can plug into your budget. Speaking of your budget...

You want to be sure to look at all your available resources. When we need or want something, we usually think about paying for it with money. But there are lots of other ways to get the things you need or want. For example, instead of paying for babysitting, two families with young children might swap babysitting services so that each couple gets a Friday evening date night once a month. Be creative and aware of the happenings in your community to find free or low-cost ways to get what you need. Your local library has more than just books; they have movie DVDs, music CDs, audio books and more.

Free income tax assistance is available for families earning about $49,000 or less: http://www.aarp.org/applications/VMISLocator/searchTaxAideLocations.action. Food coops can help stretch your family's food budget by making low-cost groceries available. Organizations in your community sponsor fairs, festivals, and other low cost events for entertainment. Read the community bulletin boards, listen to community announcements, and watch the community cable channel. You'll find lots of ways to get the things you need while saving money. Speaking of saving money...

A savings strategy is critical to a firm financial foundation. Decide on an amount or percentage and make a commitment to "pay yourself first." That means putting the money in the savings account at the beginning of the month, not waiting until the end of the month to see if you have anything left. If you don't pay yourself first, there will rarely be anything left to save. Have an emergency fund of at least 3-6 months worth of your living expenses to carry you through any rough patches. Then continue the savings habit to reach your goals and ensure your future financial security. For great ideas about ways to save visit www.feedthepig.org or www.choosetosave.org.

By following these steps, you'll begin to prepare a strong foundation for your personal finances. If you would like to learn more about this topic, contact us for information about our free Managing Your Money series, which is offered continually in localities throughout the Northern Shenandoah Valley. Call me at 540-459-6140, e-mail me at kpoff@vt.edu, or call your local office of Virginia Cooperative Extension.


Comments that are posted represent the opinion of the commenter and not the Northern Virginia Daily/nvdaily.com.


Author - Brittany Michael Author - Karen Poff Author - Karen Ridings Family & Human Development Family Financial Management Food, Nutrition, Health

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