Page 216 - digitalliteracy

10.1 Getting Your Personal Finances in Order

Let’s look at Elena Maria’s percentages in her income and expenditure statement. She spent
16% of her after-tax income on rent. Typically, most people in her age group spend up to 27%
on housing (Burbank & Keely, 2014), so having a roommate has allowed her to have a nicer
place and save money. The percentages also give her the opportunity to see where she might
cut expenses. For instance, after she sees what percentage of her budget she spent on cloth-
ing, she may decide to cut back so she can save up for a larger financial goal, such as buying
a car.

The best way to get a handle on your expenditures is to track them for a longer period of time,
since your spending will vary from month to month (see Strategies for Success: Know Thyself).
Try keeping an income and expenditure statement for several months or even a whole year.
With that information, you can figure out how much you spend on average, which will give
you even greater insight into your spending habits. There are a number of mobile apps, such
as Mint, Money Manager, Money Tracker, and Expense Tracker, that can help you keep a record
of your expenses. Some banks offer this feature as part of online banking, as well. But good old
paper and pencil is fine, too. Collect all of your receipts and be exact.

Strategies for Success: Know Thyself

You may be surprised by how much you spend on items like dining out, entertainment, or a cup
of coffee. It is not always easy to cut back on those types of expenses, because they require you
to break established habits. If you know your weakness is impulse shopping, take only the cash
you need to the place you are going and leave your extra cash and credit cards at home. If you
are easily influenced by friends (and who isn’t?) to spend money you do not have, then take
only $10 with you, which prevents you from spending more. You need to know and understand
yourself to be able to negotiate around your weak spots.
Reflection Questions

1. Why does it help to know what percentage you spend on a particular category?
2. How will tracking your expenses for a month help you with your finances?

Define Your Goals: Be SMART

Now that we know Elena Maria’s current state of
income and expenditures, we can concentrate on
her financial goals. Elena Maria wants to save up for
a car. Her older sister, Sofia, borrowed the money
to buy her car and complains often that so much of
her hard-earned money went to pay for the interest
on the loan. As a result, Elena Maria wants to save
up enough cash to pay for the car outright, without
borrowing. In other words, she wants to set for her- Moodboard/Moodboard/Thinkstock
self a SMART goal, which stands for “specific, mea- Write your goals down, or you risk not
surable, action-oriented, realistic, and time-based.” achieving them. People who write down
Let’s see how we can make Elena Maria’s goal a their financial aspirations are much
SMART goal. more likely to accomplish their goals.

200
© 2016 Bridgepoint Education, Inc. All rights reserved. Not for resale or redistribution.

sol82612_10_m10_195-210.indd 200 6/29/16 5:20 PM