Money Management 101

No matter who you are, at some point in your life, you will have to manage your own money. Unfortunately, few of us receive any formal instruction for this essential skill. We must learn it the hard way – through trial and error.

Even in the best of times, the trial and error method is fraught with peril. Every mistake can be reduced to a dollar amount. In the past, maybe those amounts, while certainly unpleasant, weren't crushing. Times have changed. The stakes are greater, and so are the penalties. Defaulting on a cell phone bill means $500 to $1000 on top of the amount already owed. If your car breaks down on the freeway, and you can't afford to have it fixed, or even towed, it could cost you thousands of dollars in towing fees, even if you simply sign the title over wrecker so he can sell it. What's even worse, these mistakes will be reported to the credit agencies, which can damage your financial health for years to come.

But perhaps the worst effect of money-management is the stress and worry it creates in your life. Did you know that the number one source of friction between married couples is money?

Now, I'm not saying that managing your money successfully will mean that you won't ever worry about money. Probably the only way you'd ever stop worrying about money is if you owned a few thousand shares of Apple stock. But it can help you reduce your worry over money. And who knows, maybe even improve your relationship.

The first thing you should do is research. It's the key to everything, and it's usually free. Start out online. Find some financial assistance sites and absorb their free information. But please take their suggestions with a grain of salt. Not everything you read online is factual or even complete. Simply use this as a starting point, gleaning the most basic information. Then go to the library. What you need absolutely need to know is:

• How to balance your checkbook
• What interest rates are
• How to pay off loans
• How to save for retirement

Next, make a list of your financial responsibilities. Write down what you owe, who you owe, what the interest rate is, and minimum payment amounts. Be sure to include daily expenses, such as food and gas.

This is your basic budget. If you match these expenses to your monthly income, you'll see areas you might be able cut costs as well as how much money you can set aside for retirement, or a savings.

One last piece of advice: Try to avoid credit card debt under any circumstances. Don't charge anything that you won't be able to pay off at the end of the month.

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