In today’s economic crisis, it appears that financial common sense has also gone out the window. What is financial common sense and how can families get back on seemingly solid ground?
In today’s economic crisis, it appears that financial common sense has also gone out the window. What is financial common sense and how can families get back on seemingly solid ground?
Don’t spend more…
“Don’t spend more than you earn” sounds like basic financial common sense. However, with the explosion of credit cards, it is relatively easy to spend more than you earn. Unfortunately, spending more than you earn comes with the price of 18-26 percent interest on the unpaid balance and associated late fees and penalties if not paid on time.
How do you know if you are spending more or less than you earn? There are two basic ways to answer the question. You can pay all of your bills and expenses by cash or check and not use any credit. Or you could track your income and expenses on a monthly basis using either a ledger or spreadsheet and see if you have a surplus or deficit at the end of the month. Understanding and managing your cash flow is basic financial common sense.
A penny saved…
“A penny saved is a penny earned” is as true today as it was in the 1700s when Benjamin Franklin said it. Saving for a rainy day or to fund future financial goals, such as retirement, education or a major purchase, makes good financial sense. One of the most effective ways to start a savings program is to put it on automatic pilot, either through payroll deduction or automatic checking account withdrawal. It is difficult to spend money that you don’t see.
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