Recently on Medium, a provocatively-titled article climbed to the top of the engagement lists. It’s a powerful, insightful and cautionary tale targeted at young women about the dangers of being financially dependent on other people. A quick scan through the highly-emotional comments reveals the depth of the chord this piece struck with many, and the lessons within can be applied to anyone taking their first steps out into the real world.
As the story shows, being financially strapped might lead you to stay at a job you hate, tolerate a relationship that hurts you, and flat out behave in ways that go against your morals and standards. And although your salary plays a big role in whether you are able to support yourself, there are decisions you can make regardless of your salary that will keep you moving toward financial independence rather than away from it. A lot of it comes down to the simple principle of living within your means, but at times it’s hard to know exactly what your means are. Instead of operating on gut instinct when deciding whether you can afford something, what if you knew exactly whether you could afford it? What if you knew exactly whether leasing a new car is okay or a bad idea? That is where ClearFactr can help.
ClearFactr lets you create financial plans that are easier to understand and manipulate than those you could create in Excel, all for free and from the comfort of your web browser. Financial planning and modeling is an art in and of itself, but anyone can understand the basics. In the case of a personal budget plan, you would create a section for income, a section for expenses, and a section that subtracts expenses from income to figure out money left over. Then you would enter expected numbers for income and expenses on a monthly basis. For a young person the income section will most likely just contain your salary, but the expenses section can be as broad or granular as you want. An easy place to start is to figure out how much money you have left over each month after subtracting taxes, rent, loans, and food expenses from your income. Then you can start tweaking individual numbers and drilling in further, like allocating separate funds for groceries vs. eating out.
This exercise will very quickly inform you of what your “means” are. When you subtract taxes, rent, loans, and food from your income and realize you have $300 cash left over per month, the decision to lease the new Accord or stick with your old Civic becomes a lot more clear. The next step is to build savings right into your plan, so instead of having $300 left over you actually have $200 because you already set aside $100 for your savings account. You can play with the ratios of these numbers to fit your own needs, but the point is that you are now starting to get a concrete understanding of exactly how much money you have to spare.
ClearFactr offers a few templates that will help you get a jump start on making a financial plan for yourself. By making a plan and figuring out exactly how much money you have coming in and going out, you can start making informed decisions about when to spend and when to save. This will help you build a fund to protect yourself from being overly dependent on other people, and as your fund grows we think you’ll find yourself feeling more in control of your life and more prepared to face challenges in the future.