What You Need to Include in Your Financial Toolkit – Part 1
One part of setting yourself up for success is having a financial toolkit that works for you. Everyone needs a financial toolkit – an arsenal of financial products and accounts to help you meet your end goals. Regardless of your financial standing in life, these products are so important, especially if you want to take control of your finances.
For the next month, I’ll be sharing ways to take control of your finances. Shopping season will be here before we know it (unless you already started), and it’s important to take control of your finances before they control you. In the meantime, start by making sure that you have these accounts!
The first type of tool that you need in your financial toolkit is a “spending tool.” Spending tools are methods to spend your money (yes, I’d much rather save my money and work by candlelight, but even candles and food cost money).
Cash is one tool you could use to spend money, but you can’t use cash for everything (and do you really want to?). While I understand the desire to carry cold, hard cash with you at all times, after having my wallet stolen on multiple occasions (and hearing horror stories from people who lost huge sums of money when their house was broken into), cash isn’t a perfect solution. Not only are you unable to pay cash for everything, like utility bills, but cash is so dirty (I have “dirty cash” stories from when I worked in a bank that would churn your stomach).
I was shocked by the number of people who came into the bank and didn’t have a checking account (and had no desire to open one). Instead, many people used a savings account and paid fees every time they withdrew funds. Sometimes, people refused to have any account at all, and instead paid for everything with cash or with money orders that they purchased (for a “small fee” that quickly added up over time).
By opening up a simple checking account (most banks offer a free account), you have peace of mind knowing that your money is safe. You also can safely send a check as a gift for things like weddings (again, I’ve heard so many horror stories about cash getting stolen or lost). Even sending cash through the mail can be scary. Have you ever mailed anything only to find out that it never reached its destination?
As long as you faithfully make your payment (in full) each month, credit cards can be a wonderful addition to your financial toolkit. In fact, they’re my favorite part! I love knowing that every time I pay for something, I’m earning cash back and “making my money work for me.” Credit cards can even be used to help finance large household projects. For example, when we remodeled our kitchen, we put the majority of our expenses on a store credit card. We had a year to make payments with zero interest charges, and then we paid off the balance in full at the end of the year. We used the credit card like a savings account to pay for our kitchen. We planned our kitchen remodel with our budget in mind, and each month we used our remodel funds to pay down the credit card until it was paid off at the end of the year.
You earn extra brownie points if you already have a budget in place. If not, don’t worry! I’ll help you create the perfect budget for you in January. In the meantime, read about the different types of budgets and start using your checking account and credit card to track your expenses. If you pay for something with cash, try to track that, too. For example, if I spend $60 in a month to get everyone’s hair cut, I withdraw that from the ATM and track how it’s spent in my budget. For everything else, I pay with a credit card (or pay bills from my checking account if they don’t accept a credit card).
Do you use these “spending tools” in your financial toolkit? Check out the second part in this series for more tools to include in your financial toolkit!