Sound budgeting a vital practice for young workers
It's the one document from my bank that I honestly look forward to reading at the start of the year.
No, it's not my new mortgage statement and payment schedule, nor is it the equally depressing tax document that reports the microscopic amount of interest I earned over the past year.
What trips my trigger is my annual credit card expenditure statement. You see, I use my credit card a lot for convenience and to take advantage of the rewards program, and this statement provides an abundance of information on all my transactions.
The best parts are the charts -- one that slices and dices my plastic purchases by categories and another one that shows my spending activity month by month.
While I can easily recite what I pay every month for the mortgage, insurance and some of the utility costs, I'm not so sure about groceries, dining out and entertainment costs. By taking stock of my spending and putting it together with my wife's credit card data, I can see the big picture of where the family income goes.
Those numbers can be eye-openers, especially if I need to veto the cash outflow in a few budget line items.
Whether it's relying on a paper credit card report like I do or tracking spending through the bank's online service or a go-to budgeting website, it's a good idea for young people with credit cards to develop the habit of monitoring their expenses and income. Preferably monthly, so they can stay on track and make trade-offs-- for example, if they need to cut back on dining out to cover a new set of tires.
Too often, financial advisers say, young people fail to take full advantage of their salary and benefits when starting that first job because of fundamental mistakes they make handling money.
Top of the list: Piling up too much debt instead of socking money away or making a big dent in paying down college loans.
It can be awfully tempting in that first steady job to burn through your disposable income. That's why they call it disposable.
If your children aren't into old-school budgeting, or should I say spending management, they can track expenses at several outstanding free websites.
The gold standard in budgeting websites is Mint.com, which is owned by Intuit. You can link the website to your banking and investments accounts -- all safe and secure. The site then tracks your spending, suggests ways to help you save, alerts you when bills are coming due and more.
There's also a "Goals" tool where you can set target amounts and dates for achieving a financial goal, such as paying off a car loan.
Another good site, aimed at financial newbies, is Learnvest's Money Center. As with most of these sites, Learnvest links your accounts, divides spending into categories, establishes savings goals and tracks the inflows and outflows.
There's also Learnvest's Bootcamp service, mostly 10-day email programs that provide financial tips on various problems or stages of life, such as getting married or budgeting for a new wardrobe.