Financial Basics for Every Girl Boss

For my 2019 New Year's resolution, I told myself that I wanted to understand finances so that I could do more than just save money. I wanted to understand the best way to manage my money, how interest works and how to build my credit score. There are basic adulting things that they don't really teach us in school unless you're a finance major, so I went out of my way to learn them. Here’s what I’ve learned so far:

Checks

Pay day is always a day that provides relief, but how exactly are you supposed to break down this check so that it lasts until the next one? It’s always so tempting to spend the whole thing in one go. 

I read a book by Nicole Lapin, and according to her, there are three F’s to keep in mind when breaking down your check. I cite her as my example because this makes the most sense to me.

The first F is fundamentals, and this is about 70 percent of your check. This pays for the important things, like apartment rent, gas for your car and tuition for classes. It’s as high as 70 percent because these are the important things you need for survival. You work the crazy hours you do so that you can pay for these things.

Fun is the next F, and it makes up 15 percent of your pay check. This is how much you should spend for pleasure. It’s that latte you treat yourself to before heading to work—or the long night out at Pub if that’s your preference. By giving yourself this 15 percent to spend on little things, you won’t go on a crazy shopping spree that puts you into credit card debt in the long haul. I thought that this was hard at first, but it's honestly a lot easier than what it sounds like.

The final F is for future, and it’s the last 15 percent that is left over. This is what goes towards your life savings. It’s not necessarily just for your retirement, but it’s also just in case you become unemployed. It’s a safety net for the tough times so that you don’t have to stress too much about whether or not the bills will be paid while you go find a new job.

Building Credit and Dealing with Debt

When I first got to college, I think the scariest thing on my mind was accumulating student debt. To this day, it still scares me. However, because of my New Year’s Resolution, I’m not as scared of it anymore. That’s because even though it sucks, it’s the best type of debt to be in. It accrues the least amount of interest when you compare it to a mortgage or car loans, and it’s the one thing you can invest in that no one can take away. You can take away a house and a car, but you officially earned that degree yourself. No one can take away your brain. I’m a firm believer that the best investment is in yourself, and this is proof of that.

On the other hand, the worst debt to have is credit card debt, but having one is a great way of building credit. It’s the easiest thing to sign up for. It’s also the easiest debt trap to fall into. The trap is just paying the minimum payment every month. The reality is that “minimum payment” is the interest rate, and if you only pay that minimum, you will struggle with paying off your credit card in the long run. The best thing for you and your credit score is to pay off your credit card in full, or to at least strive to. 

Saving Money

Knowing what I know, I’ve developed a plan to help me save money for things like the new apartment or the money to fund a trip to Her Conference in the summer. To help you develop your own, here’s what my plan looks like.

I have a cash-only method in place. Working in a nail salon, I get some cash tips, and when the week starts, I’ll take out my weekly budget in cash. This makes me more aware of how much I have to spend, and I’m not tempted to go over my budget. With a plastic card, it’s too easy for me to mindlessly swipe and not care. By restricting myself to cash, I don’t go over budget.

I’ve also started to track what I spend my money on. For example, by tracking things, I realize the biggest drain on my fun funds is eating out. Since I’ve realized that, I have actively reduced how often that happens, and I’ve been able to spend it on other things, like a Starbucks coffee on my way to class, or a new dog toy for my dog.

Finances are not a fun thing to deal with, but everyone has to deal with them. This article only scratches the surface of what it means to be financially stable, but I hope that it helps every girl boss strive to be financially independent.

Images: 1, 2, 3, 4