It’s tax time! Around this time of year, we not only think about our taxes, but we also think about our overall financial health. This week we’re sharing financial resources as well asking experts in budgeting, student loans, and more how nonprofit employees can make the most of their paychecks. Be sure to read all of the posts in this series.
A survey released earlier this year found that half of nonprofit employees have considered leaving the sector to find better compensation elsewhere. Yikes! But while many of us want better salaries, how can we save money and plan for the future with the salaries we have? We did some research and spoke to Vince Maniago, Group Product Manager at personal finance site Mint.com for additional advice.
“It’s a really important subject matter for everybody to think about, but especially for folks who are pursuing social impact careers,” Maniago said. “I understand money might be tight because, for folks who work in nonprofits, their salaries might not be as high as the private sector. But anything you can do to be more mindful of your saving and spending is great.”
Here are five things to consider when tackling your finances:
Understand where you spend your money
Awareness is often the best way to whip your finances into shape. Some people write down every purchase they make in a notebook or in an Excel document, while others turn to sites such as Mint.com, Manilla, and HelloWallet.
Sometimes simply writing down expenses is enough for people to realize where their money goes. Others need a longer view. Mint.com can analyze your past 90 days of spending, provide tools to set up a budget, and offer email alerts and notifications about when bills are due, when you have exceed your budgeted amount in a certain category, and more.
“There is a whole segment of users, usually younger, who don’t really want to budget and they don’t necessarily want to save for a house yet,” Maniago said. “They just want to know whether they can afford to make that next purchase or whether they can afford to go out to dinner.” These employees, he added, can start to develop healthy habits that will stick with them as they make more money.
“If you’re not yet ready to engage in the long-term planning, which eventually we all have to do, being aware of your spending is next best thing you do,” he added.
Be honest and realistic about change
Once you get a good sense of how you spend your money, it’ll be easier for you to create a budget that realistically reflects your needs (while also highlighting places where you need to cut back). For example, when creating a budget, if you estimate too low for necessities like food, it will be tough to stick to your goals.
Instead of allocating specific amounts for certain things (like $100 for eating out), a simple rule of thumb advocated by LearnVest, is the 50/20/30 rule: 50% of your take home goes to essential expenses like rent and utilities; 20% goes to financial priorities like retirement and loan repayment; and 30% goes to lifestyle choices like movies and eating out. The flexibility of this also makes it easier to change depending on your unique financial circumstances.
Focus on two goals
Everyone is different, but Maniago suggests two starter goals when you start to tackle your finances: set up an emergency fund and pay off all debt.
“The first thing I would do is insulate yourself from financial catastrophes,” Maniago said. “I would love for everyone to have an emergency fund that has enough cash to cover the next three months of your expenses. And, whether you have credit debt, student loan debt, or both, we have a way, through our pay-off debt calculator, to help you figure out which to pay off first, and at which rate you can pay off each piece of debt and get a plan to do so.”
Take advantage of technology to learn and connect
While many people are increasingly using technology to take care of financial tasks like banking and bill payment, mobile apps and websites can also help you keep track of your spending. Mint has a website and mobile app, which means you can check your budget on-the-go, and traditional online banking can help automate monthly bills, transfers into savings accounts, and retirement contributions. If you want more information on how to use personal finance apps, check out Mashable’s primer on the topic.
You can also use technology to learn financial tips and tricks while connecting with like-minded people. In addition to Mint.com, check out sites like LearnVest and You Need a Budget, for money management tools. Or visit blogs like The Simple Dollar and Wise Bread for tips and stories on personal finance.
Once you get into a good rhythm and have set up an emergency fund and paid off debt, then the fun begins and you can start saving for something bigger, such as buying a car or house or vacation. Looking ahead to retirement, there are also tools to help figure out how to rollover any retirement savings you already have and combine various 401(k) or 403(b) accounts.
“The younger you are, you can take advantage of compound interest of retirement plans,” Maniago added. “Even if your employer doesn’t have an employer-sponsored plan where they match your savings, I would recommend looking into an IRA—either a Roth IRA or a regular IRA—as soon as possible. Just getting whatever you can put in there, a few hundred dollars. Every year counts and it just goes up and up and up.”
Overall, Maniago said that budgeting and saving with a low salary can be done—and it can help create good financial habits: “First it’s about awareness, then it’s guidance, and then it’s motivation to stay on track, and that creates a habit that can last a lifetime. That’s the goal.”
What advice do you have for someone hoping to save money and get on a budget? What practices work for you?