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Financial Literacy

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Financial Literacy

Money management is about knowing where your money is coming from and where it is going. Mastering its flow is the key to getting a better grasp on budgeting. When creating a personalized budget, there some steps to intently consider. However, using a spreadsheet is optional. The important thing is coming up with a template that works for you specifically.

The first thing in the management of finances is knowing how much you earn. Keeping track of your net income is important. The net income is your earnings less the deductibles. This is the money taken home and should be the one used when making the budget. Anything that is adding a surplus, like from a hobby, should be included as it supplements your income (Bank of America Corporation, 2017).

After knowing what you take home, it is now prudent to know what you spend. This is not only done to put entries in your budget but to identify your biggest drainers and to also figure out what to cut back on. The first step towards tracking your spending is to list all fixed expenses. These are the regular bills you pay periodically. The usual suspects include mortgages or rent, utilities like water, power, and internet. These are essential basic needs, and it’s hard to cut back on them. Bank or credit card statements are very helpful when it comes to listing these frequent expenditures. Next, you need to list the variable expenses. If you own a car, gas is on this list. Groceries and entertainment are also included. This is where opportunities to cut the spending arise. To monitor these variables, you should note down daily expenses either on a phone application or with a pen and paper. Receipts should be saved too.

The next thing to do is to find out what you want. This means setting a goal, short-term or long-term, on what you want to do with the information you have gathered. The main aim should be savings. Long-term goals could be retirement or your child’s education. Reducing credit card debt or buying a new car are examples of short-term goals. They should be based on your priorities. This is to help you keep focus when budgeting so that you do not go into your savings for impromptu incidentals (Bank of America Corporation, 2017).

Planning is the next necessary step. This should reflect your goals of setting money aside. The plan should be made after the compilation of both the fixed and variable monthly costs. You need to find out how to spend in the subsequent months through extrapolating past trends in spending. Your outlays should be divided between wants and essential requirements. Any adjustments to be made on the budget are usually from the wants column. An example of a non-essential is a monthly magazine subscription that you may not diligently read. Moreover, the plan should be actionable, that is, what you can do to cut down on spending to increase savings.

Adjusting your habits is also important. This is especially important when you have more wants on your overheads than needs. There could be money freed up that can go into saving to help you achieve the goals you had set earlier. Nothing is too little to overlook. If that proves to be insufficient, then fixed costs can be altered by making trade-offs (Bank of America Corporation, 2017). An example is choosing public means of transport instead of using your car if bus fare is cheaper than gas and parking fees. The weight you place on your static responsibilities would be the indicator on the areas you need to tighten the belt. These effects would eventually be felt over time (Kiplinger, 2017).

The formulated budget should be regularly reviewed so that you can make sure you are on track to achieving your set goals. The regular revisiting is also necessary to see the areas you can further reduce the spending or even see alternative trade-offs that can be made to help place you in a savings position (Tyson, 2017).

Investing is a good place to earn more income consequently increasing your savings through diversifying your income channels. However, it is important to be careful when deciding when and how to capitalize. Balancing your portfolio and maintaining your goals is important. This will keep you disciplined moving forward (Tyson, 2017).

Salary Life Insurance
Side business revenue Health Insurance
Income Totals Taxes
Social Security
Total Deductibles
Net Income
Fixed Amount Variables Costs
Rent Groceries
Water Credit card payments
Power Phone bill
Internet Entertainment
Food Social events
Car Payments Gas
Fixed Totals Variable Totals







Maximizing your savings can be done through other ways that do not include reducing your monthly costs. You can take advantage of the employer incentives like the 401(k). Having a good credit lowers interest rates. You can also maximize on credit card rewards like free airlifts and hotel accommodations. Working on your career also makes you eligible for promotions hence more income. You can also follow up on insurance discounts. These will go a long way to help you save every penny and dime (Kiplinger, 2017).


Bank of America Corporation. (2017). Creating a Budget with a Personal Budget Spreadsheet. Better Money Habits. Retrieved 30 May 2017, from

Kiplinger, K. (2017). Kiplinger’s 70 Ways to Build Wealth. Kiplinger’s Personal Finance, (April 2017), 22-31.

Tyson, E. (2017). Investing for dummies (1st ed.). John Wiley & Sons Inc.


















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