Is it too late for me?

It’s one of the most common questions asked when it comes to being smarter with your money. And age doesn’t matter. People in their 20s ask the question as do people in their 60s.

Finances are confusing. There are so many options. So many people in your ear telling you what’s best. Telling you how to make money, save money, do anything to set yourself up for a better future.

Many are afraid of the risk involved with saving. Hard-working individuals don’t want to put their money in the wrong place and on top of that, many are living paycheck to paycheck and struggle to set anything aside.

There’s a term called analysis paralysis and it describes people who simply analyze so deeply that they never end up making a decision. This is what happens with those who overanalyze their options for retirement savings.

As a result, nearly half — 48%, according to a U.S. Government Accountability Office report — of Americans over the age of 55 have no retirement savings. And with the issues surrounding Social Security and the complications that loom, it may be unclear where these 48% will get the necessary finances to survive once they hit retirement age.

48% of people over 55 have no retirement savings.
(U.S. Government Accountability Office)

But analysis paralysis is normal, especially when it comes to making critical financial decisions. After all, being smarter with your money is much easier said than done.

So where does one begin? Is the formula for a 25-year-old the same as one for a 55-year-old? There are many important questions surrounding financial decision-making, but there’s one that’s the most important:

Where do you start?

It’s not always about budgeting

Go to any personal finance blog or website and you’ll see the first suggestion — or demand in some instances — will be to start budgeting your money.

Cut back on dining out.

Carpool to work.

Follow the 50/30/20 rule of spending: 50% on needs, 30% on wants, 20% on savings.

But not all situations are similar. Budgeting what you have isn’t necessarily a one-size-fits-all solution for becoming smarter with your money.

Different life circumstances call for different spending habits and so, too, do different personalities. For example, Robert Kiyosaki, author of Rich Dad Poor Dad suggests living above your means and working hard to support that lifestyle.

Essentially, he says to live the life you want and figure out a way to make money instead of taking the time to cut corners and trim your budget instead.

On the other hand, JL Collins explains in The Simple Path to Wealth that you can become wealthy by properly allocating your money into investment and savings accounts with your current income, regardless of the amount.

Your desired method is a personal preference. Do you want to play it safe or take some risks? There’s no right or wrong answer.

Regardless of which you prefer, there is one thing that is absolutely critical to achieving your financial goals:

Being smarter with your money starts with having a balance sheet

What is a personal balance sheet and why is it so important?

A balance sheet can be drawn on a piece of paper, a napkin, or kept in a spreadsheet on your computer or phone. But it needs to be accessible. To be smarter with your money, it’s essential to have a balance sheet in order to see all of your income and expenses listed.

Typically, this is a document used by business owners to balance their expenses and ownership share versus their revenue. Being considered a business document makes it easily overlooked by the everyday individual, but it can be a tremendous visual for your personal finances as well.

To create a balance sheet, you can fold a piece of paper in half and list Income on the top of one side and Expenses on the other. Then, list each.

What goes under Income?

• Salary
• Income from “side hustle”
• Interest earned on savings accounts, etc.
• Dividends or earnings from investments

What goes under Expenses?

• Rent or mortgage
• Utility bills
• Groceries
• Credit card payments
• Car payment(s)
• Entertainment expenses
• Subscription services

A balance sheet is such a simple concept and one that can allow you to plan to be smarter with your money by showing what you currently make and spend.

The best part? It costs nothing to create yet it can save you money by helping you balance finances. It can also help you avoid unnecessary overdraft fees that put over $11 billion in the pockets of banks each year.

Getting started is the most important step

When the clock struck midnight on New Year’s Eve, what was your resolution? What did you tell yourself you were going to do differently?

Eat healthy?

Quit your job?

Lose weight?

Many of us claim that we’re going to start preparing for retirement or be better with our money. As a whole, doing so would help alleviate the financial crisis that continues to ripple through the lower and middle classes of the country.

Unfortunately, as with losing weight, quitting your job, and getting healthy, having a better financial situation typically falls by the wayside after a few weeks.

But with a balance sheet somewhere easily accessible, the idea of becoming smarter with your money and preparing yourself for the future becomes much easier.