Tips and Tools for Making Your Relationship with Money Healthy and Fulfilling

This week, the New York Times ran an article entitled, “How Millennials Became Spooked by Credit Cards,” about how twenty and thirty-somethings are largely choosing to rely on cash and debit instead of credit because of what they witnessed during the financial crisis.

This departure from credit cards may have consequences when looking into bigger purchases financed by debt. Credit scores and credit history are often used by mortgage lenders to judge the riskiness of a borrower- without a substantial credit history, it may be harder for some to secure a mortgage.

On the other hand, we have all either witnessed a friend with large amounts of debt or we ourselves are experiencing it.

There has to be a happy medium between swearing off credit cards and going into massive debt, right?

The answer is yes– you just have to be willing to invest a little time and effort.

Our relationship with money is one of the longest relationships we’ll have in our life. Since we’re together for the long haul, NeighborWorks of Western Vermont encourages making that relationship a trusting, nurturing, and sustainable one.

We suggest starting by:

Tracking your finances

Okay, so it’s not the most exciting of starting points. BUT think of it as the beginning of any relationship: getting to know each other.

While this can seem tedious, tracking your spending is the best way to find out exactly where your money is going. You may think you know, but when you’re looking at your bank statement at the end of the month and wondering where all that money went, tracking your spending helps.

There are several different methods and depending on what your style is, they won’t all work for you- the trick is to find one you can fit into your schedule and maintain.

• Use a notebook and pen or keep track of receipts
  For those of us who prefer to avoid technology, a notebook and pen works fine for tracking expenses. Every time you take out cash or your card, make sure to jot down the amount and item or category (i.e. “8/12/16, $2.99, Coffee”). Or, make sure to ask for a receipt to review at the end of the week or month.
• Review your bank statement every month
  This is simple. Either access your account online or have it mailed to you from your bank. Sit down, review it, and create categories for your expenses. Some common ones are “transportation,” “groceries,” “eating out,” “entertainment” “utilities,” “rent,” “car payment,” etc. Once you’ve determined your categories, sort your expenses into them and add them up. Now you know where your money’s going.
• Use an App
  For the technologically inclined among us, these apps take the hard part of money tracking and make it simple. Mint automatically tracks your spending and categorizes it. Wally provides a complete picture of your expenditures, and allows you to check who much you’ve spent daily, weekly, or monthly (it also allows you to scan receipts to keep track of cash purchases).

Setting a budget and goals

Now that you know where your money is going, you’ve established a baseline of information to use to create your personal budget.

• Create a budget 
  Using set categories, set a budget for your spending and then … (this is the most important step, like any relationship) … make time every week or every month to review your spending and see if you are sticking to your budget. Include personal savings in your budgeting and challenge yourself- set goals and try to meet them. Keep in mind that some expenses are irregular, such as car maintenance or heating expenses.
• Use an App
  These two apps take different approaches to budgeting and goal setting, but both automatically track your spending, again making keeping track of your finances easier.
  • Goodbudget is an app that uses the time-tested envelope budgeting method. The users can create “envelopes” for each of their budget category – groceries, transportation, housing, etc. – and pre-determine how much they’re going to allocate in each envelope.
  • Level Money automatically calculates your income and recurring bills, and then sets goals for your daily, weekly, and monthly spending. It also comes up with the amount you should be saving every month and subtracts that from your monthly budget, so you can effortlessly answer the question, “what can I spend today?”

Taking a Financial Capabilities course

For those interested in getting a handle on their finances, a class is a great place to start. LearnLux is online and geared toward a younger crowd, and the NeighborWorks’ Financial Capabilities Class is a deep dive into finances, credit, savings, and homeownership.

• LearnLux
  LearnLux aims to teach millennials about insurance, investing, and other issues that they will encounter as they enter the workforce and begin to pay off student loans (and build savings). It offers free, online classes on refinancing student loans, building credit, setting up benefits at a new job (or rolling over benefits), and investing for the first time.
• NeighborWorks of Western Vermont’s Financial Capabilities Class
  Financial Capabilities is an eight-hour course for renters and homeowners who want the knowledge and resources to make better financial decisions. We offer the class in four parts:
  • Part 1: Reaching Your Financial Goals
    How to develop– and stick to– a financial plan, reach financial goals, wants vs. needs, financial crisis management
  • Part 2: Saving and Investing
    Strategies to reduce spending and increase income, identifying savings tools and resources, the difference between, and importance, of savings and investing
  • Part 3: All About Credit
    Pros and cons of credit, how to establish, rebuild, and maintain good credit, how to protect your credit, bankruptcy
  • Part 4: Your Own Home
    Getting ready to apply for a mortgage, determining your price range, how insurance protects against potential losses, tax credits and benefits for childcare, education, and home ownership

Meeting with a Financial Coach

Unlike financial counseling, financial coaching encourages and empowers YOU to set and meet financial goals. At NeighborWorks of Western Vermont, after taking a Financial Capabilities Course you are eligible for free, one-on-one coaching.

Our coach will help you set goals, create action plans, and follow-up with you to make sure you stick to the plan, adding accountability to your financial behaviors.

Sign up for our online financial capabilities class and then schedule a coaching session!

Invest in your relationship with your finances today and ensure that it is healthy and fulfilling throughout your lifetime. If only every relationship came with a manual!