As people grow older, they lose some of their financial literacy - their basic knowledge about money and related decision-making abilities. Yet their confidence in their financial abilities doesn't diminish, research suggests. Awareness of this blind spot can help you be less vulnerable to making poor decisions.
The best tip I received when it came to expanding my own financial literacy was to identify my spending habits/patterns. Becoming aware of my own patterns allowed me to then change my behaviors and focus on my ultimate goals.
What tips can you share that have helped you stay on top of your finances?
I’m pretty computer literate but unlike my economist friend, I continue to keep paper & pencil ledgers of my checking and savings transactions. Like him, I do trust the bank and other institutions to do this for me—even better than me actually. BUT by doing the tracking the way I’ve done it for the last 55 years I am always aware of what’s coming and going and needed in my financial dealings, and I’m using a system that I not only have a lot of comfort and confidence in, but one that serves as a readily accessible, convenient backup to whatever is online. Finally, my holographic entries need no deciphering the way some bank line items do (e.g., “PAYMT: MUFC 1128 ExpedSta”).
When my stepmother died of COVID in March 2020, my father panicked because she was in charge of paying all the bills. My father didn't have a good idea of what bills they had, when they were due, etc. Luckily, my stepmom was still getting bills in the mail and paying with checks. But my father didn't trust himself to remember to do this so we set up all his bills to automatically deduct from his checking account. He keeps track of all his accounts on a password protected spreadsheet with account numbers, passwords, and other information. That way if something happens to him or I eventually have to take over his financial affairs, I'll know what's going on.
Since I've always worked for commissions, I always had the mentality that a sudden $100,000 payday should be treated as if it were a $33,333 pay day for three years, and then budget accordingly for that year's $33,333 increase in income. The alternative might have been to buy a much more expensive vehicle and have far less in future years when maybe things weren't as good.
Right you are - my husband and I were always self-employed and we definitely learned to live on a budget regardless of how much was coming in - the feast or famine rule - Then we did pay ourselves 1st - mostly into savings and retirement accounts. Sometimes we just worked so hard and long that you were just too tired to spend anything.
My husband was my money man for almost 49 years. He was a fan of the envelope strategy. And by dividing up yearly/monthly bills such as insurance, taxes, utilities, medical deductibles, gas, groceries, weekly allowance and a $1 a day account each month we were able to put that money back and always had enough to go around. Last year his cancer returned and throughout the months he taught me his strategy. I always told him I would simplify it if I had to do it. Sadly he passed away in June 2021. I have since found that his system worked and have not changed a thing. Because of him and his system, I should not have to worry about anything. He was a very wise and loving man.❤