Create and Maintain a Budget – Finance 101
The first step to avoiding the troubles of financial debt is to
create and maintain a budget. Itís not as intimidating as it
sounds, donít worry.
First off, create a list of all your monthly income and also a
list of your monthly expenses. When determining income, list all
sources including alimony, child support, side jobs, etc. In
calculating expenses, be sure to include housing, food,
transportation, utilities, entertainment, etc. To gain an
accurate reflection of actual expenses, sit down each night and
write down expenses, just make sure to save receipts. Determine
if your income covers all of your expenses. If the answer is no,
then some expenses need to be reduced.
Adjust expenses. If it is a small discrepancy, it may mean
reducing some minor expenses like entertainment or cell phone
plan. If the deficit is larger, you may need to downsize your
vehicle or living arrangements. If your income covers all of
your expenses, you still may want to trim some of the excess fat
off your spending habits. This can free up extra money for
things such as vacations or college funds for your children.
Additionally, consider if you need to add new categories. Some
areas that are often overlooked are debt reduction, emergency
savings funds, and retirement savings. An emergency fund ensures
there is an adequate amount available to cover unforeseen events
(car emergency, etc), should it arise. This will eliminate the
need for using credit which can quickly damage your budget.
There are several advantages to sticking to your budget.
Firstly, most people have set financial goals that they would
like to reach in the future. Sometimes it may be a trip, a brand
new car, or a college education. A budget can help people save
money to make these goals a reality. Additionally, many people
are crushed under heavy consumer debt. Without a disciplined
pattern of spending, it is virtually impossible to make much
headway in reducing debt. A personal budget will provide the
necessary framework to begin eliminating these inflated account
If executed properly, a budget will allow a person to
simultaneously meet their expenses, place money into savings,
and pay back outstanding debts. Therefore, it is anyoneís best
interest to create and implement a budget.
Cut Back on Spending
At first it may seem difficult to limit spending and stick to a
budget, however there are a few practical changes that you can
make everyday that will cut your spending more than you expect.
Firstly, alter credit car behavior. Start to pay cash whenever
possible. This will help you avoid making a purchase unless you
actually have the money available. If you decide to make a
credit card purchase, be prepared to pay the balance off
monthly. This will save a lot of money through avoiding interest
charges. If you already have a credit card balance, then
transfer to a card with a low interest rate. Also, find a card
that does not charge an annual fee.
Another tip is to pack your lunch everyday. All of those lunch
hours spent at restaurants will add up. Bringing your own lunch
can save you several dollars every day, which will add up over
Use your cell phone during off peak hours. Some people will
spend a couple hundred dollars a month on phone charges. Avoid
this by making most calls during off peak times. Check with your
service and plan to find out when you have cheaper or unlimited
Stop throwing away the Sunday newspaper before skimming through
the advertisements. Clip some of those coupons and check out the
sales. This may seem tedious, but the savings are often worth
it. Many stores will double or triple the amount of the coupon.
This technique can save you up to 20 or 30 dollars each time you
head to the food store.
Additionally, refinance. Mortgage rates have been extremely low
over the past year. This has been a great opportunity to reduce
the monthly house payment significantly. If you are planning to
have your house paid off prior to retirement, then you may want
to factor this in before refinancing.
Finally, bundle your insurance. Many insurance companies will
offer their customers lower rates if they purchase multiple
policies. For instance, some people use the same agent for
multiple cars, and others combine their cars and house. Always
keep in mind that a dollar here and there really begins to add
up. Avoid the temptation of thinking that changing your spending
habits wouldnít save that much money.
Start Saving! So you are loaded down with bills to pay each
month and are wondering how you can begin a savings account for
emergencies and other high-expense endeavors. In other words,
where can you find that extra cash to put away for later?
Firstly, when configuring your budge, plan for your savings
first. You will grow richer each month if you begin to pay
yourself first. Before paying any bills, decide on a set amount
that you will pay yourself firstómaybe five or ten percentóor
whatever you decideóof your paycheck. Then, deposit the amount
into a savings account before paying any bills. When you do this
at the beginning of the month, your entire paycheck will not
suddenly slip through your fingers. If you wait until the end of
the month, there may be nothing left to save. Paying yourself
first will give you a systematic way to make your money grow.
Regardless of your profession or your income, this system will
work if you stick to it. Another technique you may try for
saving money is to empty your extra change into a coffee can or
a jar each day. At the end of the month, roll the coins and put
them into your savings account. You may be able to save 30 or 40
dollars each month just with your spare change. Remember that
good money management is more than just a mathematical formula.
Itís too closely tied with the ups and downs of living to be
just that. Your money management plan is always subject to
change if your life situation changes. The object of a good
budget is to make your money go the farthest in helping you
reach your goals, it is not there to force to you to abide by
rules. Donít get discouraged if the budget plan doesnít work
perfectly right away. It may involve some revising and editing
until it fits your needs. Then, make sure to review it often,
and be sure it is making the best use of every penny! Because we
know how helpful those spare pennies can be!
Avoid Spending Pitfalls! With all the advantages that are
evident from personal budgeting, it is no wonder that more and
more people are relying on them to reduce debts and increase
their savings. However, all ëbudgetersí need to be careful to
avoid some common pitfalls that appear often.
Credit cards may seem like small pieces of plastic, however they
can cause a great deal of trouble for the owners. It is common
for people to make unwise purchases, which they would have
avoided otherwise, because they had the credit card in their
wallet. The best solution for many people is simply to get rid
of credit cards and begin paying only by cash, check, or debit
cards. You may want to keep one card handy for emergencies, but
it is probably best to keep it out of reach, and far away from
Another problem with budgeting is impatience. There are
financial goals set, but people do not have the patience to
complete a savings program. For instance, an individual begins
setting aside money for a new car; however, after a few months
they discover the car of their dreams. Rather than waiting, they
make the purchase. This could pose some serious financial
strains. Discipline is a must to prevent impatience from
breaking your budget.
Once a person makes a budget, they often fail to adjust it when
necessary. A budget is created using a set of expenses and
income figures that are liable to change. As these figures do
change, it is important that the budget changes to reflect the
adjustments. There could be some major deficits if this is not
done appropriately and promptly. Of course nobody forgets about
Christmas or Hanukkah, however many people do not consider
budgeting for holidays when creating a budget. Therefore,
adequate funds have not been set aside for presents, food,
parties, etc. These items should be factored in and saved for
throughout the year. Finally, many people factor in
transportation and accommodations for vacations in their budget,
however they underestimate money needed for food, entertainment,
and spending money. Keep in mind that all the resorts and
tourists areas are double or triple what you would normally pay.
With a little planning, youíll be on your way to saving more
money than you ever thought possible!
Easy Money-Saving Changes One of the most obvious and easy ways
to save some extra cash is to change some of the way you use
products and items in your everyday life. The key is to make
minor changes. For instance, always buy the cheapest hand soap
you can find. The quality doesnít necessarily go up with the
price and you can use it in place of ëbath soap.í Always use the
whole product. Turn bottles upside down and drain to get the
last bit from them. Tear open sugar and flour sacks to get
everything; squeeze or cut open tubes to use it all before
running out to buy more. Youíll be surprised at how much there
really is left!
Also, never use more than you need. Just because it says on the
box that you need a full cup, doesnít mean that you really do it
need it. Half a measure of laundry detergent and a half teaspoon
of dish soap are examples of what are usually enough, rather
than what the manufacturer says.
To save some cash, you can use some of the things in your house
in some unique ways. Instead of spending lots of money on the
fancy floor cleaners, try using ammonia. It does a great job,
and you can use plain water in between times. If your furniture
needs some polishing, mix equal parts of white vinegar and
vegetable oil and rub on the furniture. Buff with a cloth until
For a freezer bag, use empty chip bags and close with masking
taps. Also try a bowl with a lid, such as a margarine tub.
If your skin is feeling a little dry, there are several
substitutes for expensive lotion. Petroleum jelly rubbed into
your hands at night after a warm water soak, mayonnaise (rinse
w/ cold water after), or any other oil based food. Just be sure
to put it on immediately after your hands have been in water.
To save some money on laundry, dissolve a bar of handsoap in
water to replace laundry detergent. Add three gallons of hot
water, mix thoroughly and add a cup of washing soda.
Sure, these are small changes, but added up, they can put some
extra change into your pocket throughout the year!
About the author:
William Nabaza of http://www.Nabaza.com specializes in domains,
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