Becoming Fiscally Fit

By Amy Willard, Office of Personal and Career Development

Like physical wellness, financial wellness does not happen overnight. It takes practice and consistent effort to see results. You need to establish goals and implement a plan. It’s a journey that requires adjustments along the way. You may fail, but it’s what you learn from the failure and how you move forward that will help you succeed. Here are two keys areas to begin your financial wellness journey: 1) Tracking Your Spending Habits and 2) Creating a Budget.

 

Tracking Your Spending Habits

Understand your cash flow. If you don’t know where your money is going, you lose the opportunity to spend your money on the things that matter most to you. Tracking your spending habits may seem like a daunting task. However, it is the first step in knowing where and how much you are spending daily, weekly and monthly. I challenge you to experiment for a week. You will be surprised on what and how much you spend your money. Track every purchase even the small ones such as a pack of gum.

 

  1. Track purchases. Save your receipts, write down, or input your purchases in a journal or daily log. Or use a financial app (e.g., Mint) or your bank’s app. Like food journaling, you won’t know what you’re feeding yourself unless you track it.
  2. Evaluate expenses. You want to review what you have spent each day. It is important to calculate your expenses. Total your expenditures at the end of each day and/or week for a 7-day total. This will give you insight into which categories you spend the most money and where you need to make adjustments such as dining out.

 

Creating a Budget

Whether living at home or on your own, a budget will help you stay on track. Budgeting is about choices. Managing money means making choices. There is never enough money for all the things you want. Sometimes there is not enough money for the things you need, unless you’ve planned for an emergency. It will be difficult to set and achieve financial goals without a creating a budget

 

  1. Calculate your income. To determine your monthly budget, you need to know your salary. This is your weekly or monthly pay after taxes and other deductions (net salary). 
  2. Analyze expenses. This is where tracking your spending is beneficial. It will give you what your expenses are each week or month. Expenses are divided between fixed (rent) and variable (groceries) expenses. The U.S. Bureau of Labor Statistics recommends that you divide your budget into these cost percentages: Housing (30%) – mortgage/rent/lease, tax, and insurance; Transportation (18%) – gas, insurance, maintenance, parking; Debt (10%); Food (14%) – may fluctuate, incudes toiletries and other things used on a daily basis; Household (7%) – energy, phone, cable/satellite/streaming; Savings (10%) – short-term: vacation; long-term: retirement; and Everything Else (11%) – charity, clothing, medical costs (beyond insurance). These can be adjusted slightly according to lifestyle such as living in a city without a car. Cost of living calculators are helpful, especially if you are moving to a new city.
  3. Be creative. Research areas where you can spend less such as having a roommate to share rent and taking your lunch to school/work as opposed to eating out. Buying lunch everyday can quickly add up, so can a Starbucks latte in the morning. Small purchases add up to a lot saved. Think long-term gain over short-term satisfaction.

 

Flex your fiscal muscles by starting small. You don’t have to do it all at once. Make it manageable to achieve small goals such as tracking your spending for a month or creating a monthly budget. It may take a few weeks or months to create the habit and gain some traction. Don’t give up on yourself. Your financial wellness can correlate to improved physical and emotional wellness.

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