Money Mastery, Part 1: Taking Inventory

From your girl here at Money Mic Drop, happy first Friday of the year! You made it, fam! Now let's get talking about money, via the topic of habits and mastery.

Forming a habit is hard. How long does it take? Sources differ so much so that some say 21 days, others say close to a year.

How about mastering a skill? That takes even longer. According to many studies it takes 10,000 hours. Or, anywhere from 6-10 years. If you like to take it slowly and steady, you'll find that a decade is a freaking long time.

Clearly, there's no time like the present to take inventory of your money habits and evaluate the mastery your financial skills. (Sidebar: dear readers, get used to my many, many metaphors.) Regardless if you're reading this because you've just got your first paid internship (yas) or if you've already been building up a stash of moolah, this is my first post in a series of how I'm becoming a master of my money and how you can, too.

PART 1: TAKING INVENTORY

You're kicking ass and taking names, now you need to start taking inventory of your finances.

The best money habits are ones that are so ingrained in your life and routine that you don't think about it.

Step 1. Track Your Money (Daily/Weekly)

Build a mindfulness around where and when your money comes in and where it's spent. You can keep track by hand or use Excel (there are budget templates).

Or, you can also use an app! I recommend Mint (owned by Intuit, makers of TurboTax amongst other things). I've been an active Mint user for just over 2,700 days (that's 7+ years, yes to mastery). There are pros and cons for every app, but Mint has worked for me as I leveled up in life because it connects securely to my accounts (using the same encryption that banks do) and shows all transactions in one place. It's helped me keep track of my transactions in multiple bank accounts and on my credit cards.

You can check out many other personal finance apps on Android's Google Play or iPhone's App Store! It doesn't hurt to test out a few and keep the one(s) you like, and make sure it has the feature you need/like. To make those money habits stick, you should use the method that works best for you for tracking your money.

I suggest doing this daily if you are entering transactions on your own, or it gets easy to lose track. Also, review the transactions weekly (Mint sends a friendly summary email) so there's no surprises at the end of each month!

Step 2: Clean House (Daily/Weekly)

When I moved from my parent’s home to an apartment with my Craigslist-sourced roommates, I realized how much *stuff* I had. Stuff that was outdated or broken, and clothes that I'd never wear again. Then when I moved again out of that apartment into my own place, I realized I again accumulated more items-- cookware, electronics, books, and clothes.

Whenever I moved, it was a good time to shed the weight. But now I keep things light by doing a little bit every day. I've made it a habit to take 5-10minutes a day to do one small task. For example, I will:
- Sort my physical mail into a shred pile for sensitive items and put nonsensitive documents into paper recycling pile. - Shred the sensitive document pile. - Look through my closet for an outfit tomorrow and see what items I haven't worn in ages. If I'm not sure I'll put it in a dedicated donation/give away area.
- Clear my vanity of expired makeup and jewelry I don't use anymore. - Clean out my fridge for expire items or transform items into a lunch or snack. - Clean out my pantry and see what items I need to use or restock.

What's cleaning house have to do with money you rightfully ask? Cleaning up allows you to see what you already own, and don't need to buy again. It also brings awareness into the items you buy and don't use (I need to stop buying scrunchies and hair ties on a whim at checkout). Your list may differ but all it takes is 5-10 minutes a day! I don't enjoy the idea of housework but once I get into it, it feels good! #itsthelittlewins baby.

Step 3: Know Your Credit Scores (Monthly/Quarterly)

One of the ways to build credit (in order to qualify for low rates on loans or a mortgage) is to open credit cards and use them wisely. Credit cards are my friend because I

1. Only buy what I need, and

2. I pay off in full every month.

The only time I pay a card’s minimum monthly payment is when I'm making devilish use of the “0% interest for 12month” feature of a new credit card.

There are three credit score providers: Experian, TransUnion, and Equifax. There's also something called a FICO score. Each score is calculated by a different credit score provider but the scores should be similar across the board (unless there's an error or fraud). An okay score is above 650, excellent scores are above 750.

You can also check your scores many ways. The top free ways:

- One free credit report a year on the official government sponsored website (https://www.ftc.gov/faq/consumer-protection/get-my-free-credit-report). Since the site offers all 3 credit agency reports, you can set a reminder to check Experian in January, TransUnion in May and Equifax in September.
- Credit Karma (https://www.creditkarma.com). It's free because they make offers from partner banks/lenders.
- Your credit card provider! Most credit card companies offer a free credit score (updated monthly) on their app or website once you log in.

If you notice anything suspicious, submit a dispute report through one of the sites above so your credit score can be an accurate representation of you (and not an imposter).

I’ve have the responsibility and privilege of my own credit card since I was 18. With good credit, it's going to be much easier to lease a car, successfully apply for a loan, or get a mortgage to buy a house. Check your scores often and build a solid credit history by paying off on time and in full each month.

That's a wrap here. Part 2 will be about ways to save money, and I plan to post that later this month.

via GIPHY

Did I offer youyany new money insights? How else do you take inventory of your money? Comment below if you'd like me to add anything else here.

And for those money voyeurs out there who are curious what I spend on in NYC, see you later this weekend when I post my first money diary.