By Miranda Lindsey, Volunteer.
You got the job, you’ve started the work, and now it’s the moment you’ve been waiting for: you finally get that paycheck!
But for many people, the joy and pride associated with receiving your paycheck is often quickly squashed by the overwhelming responsibilities of managing the money from that paycheck and your overall personal finances. Money is a source of stress and frustration for many people, in part because handling it in a way that fits your lifestyle and goals requires planning and understanding of proper finance management.
This leads us to a subject called “financial literacy.”
Financial literacy is essentially the understanding of the concepts of personal finance, such as saving, debt, expenses, and financial resources that help you manage your money in a way that helps you achieve your long-term and short-term financial goals. Whether your goal is to pay all your bills for the month or saving up for a house or car, building your financial literacy will help you achieve it.
Financial literacy is especially important for women. Due to a gender wage gap—a pay disparity in which men tend to earn more money than women on average—women earn $0.82 for every $1 earned by men, according to the Institute for Women’s Policy Research (IWPR). Women also hold almost 2/3 of the United States’ $1.4 trillion student debt, according to the American Association of University Women (AAUW). According to Pew Research, 42% of mothers have had to reduce work hours to care for a child or family member, compared to just 28% of fathers. Investing, saving, and managing money can be especially challenging for women due to debt, caregiving responsibilities, and barriers in the working world. But financial literacy can be an important tool to help women spend responsibly, save for their goals, and feel confident in their financial management.
Suited for Change partners with the Edge platform to offer clients access to Leadership and Professional Development courses at no cost. Some of these courses, such as the Budget and Finance Basics course, work to build financial literacy and share with clients the resources and information they need to build financial independence.
The first thing that Edge’s Budget and Finance Basics course encourages you to do is build a budget. The process of budgeting and planning for expenses is not particularly enjoyable, but it will empower you to take control of your finances and understand how you are spending your money. The goal of developing a strong budget is to make sure you are balancing your income and expenses. Regardless of your income level, you will have problems if your expenses are greater than your income.
There are many ways to build a budget, and there are lots of resources online where you can find budget templates. For example, Google Sheets and Microsoft Excel offer basic budget templates, and there are even apps that you can download on your phone such as Mint and EveryDollar for budget tracking. It’s important that you find one that works for you and your lifestyle, even if it requires building your own template yourself.
The most basic budget structure must include your income, expenses, and savings, and can be broken out over whatever period of time works best for you (weekly, monthly, yearly). Your income—or “revenue”—will be the amount of money that receive from your paycheck after all of the taxes and other deductions are removed by your employer.
As part of building your budget, you will need to list out all your expenses, which includes everything that you normally purchase/pay for in a given period of time. Listing out all your expenses can be intimidating, but it is necessary because it forces you to rethink where you are spending money and where you might be able to cut spending and save. Your expenses could include anything from a birthday gift to a friend, groceries for the week, or car payment and rent payments.
The budget process also requires considering the money that you want to put into savings and long-term investments. The Budget and Finance Basics course highly suggests putting money into an “emergency fund” which is sometimes called a “rainy day fund” or “safety net” that is specifically used for emergencies (such as unexpected medical expenses, car accidents, loss of a job or source of income, etc.). Most people say that you should have three months of income set aside in your emergency fund, and you can build this amount by saving a little bit over time into a savings account that is dedicated to this “safety net.”
In addition to building your budget and getting to know your expenses, the course also provides an overview of the resources and risks associated with your finances. The first of these is debt. Many people have debt, whether it is in the form of student loans, car/house loans, short-term loans, credit card debt, etc. Debt is not fundamentally bad, but it is important to ensure that—along with planning your savings and tracking your expenses—you are steadily making payments toward your debt.
You can start investing in your financial independence by growing your financial literacy and building your budget today. Resources are available to you online, on the apps on your phone, and through SFC to help you achieve your financial goals.
If you are a client of SFC, check out the Edge platform and its various courses on Leadership and Professional Development, which are available to you at no cost due to SFC’s partnership with Edge.
Following completion of each module, clients are provided a professional certificate of completion which they can share with companies on their resume to demonstrate their knowledge of these skills and techniques.
About Miranda Lindsey:
Miranda Lindsey is a SFC volunteer and a recent graduate of the Master of International Affairs program at the Bush School of Government and Public Service at Texas A&M University. She is passionate about service, and excited about the positive impact she can make in her community through her work with SFC.
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