How to Create & Maintain a Budget
The first step to avoiding the troubles of financial debt is to create and maintain a budget. This will prove to be a big help in getting ahead and managing your finances.
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.
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 card 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 time.
Stop throwing away the Sunday newspaper before skimming through the advertisements. Clip some of those coupons and check out the sales. This may seem old-fashioned or outdated, but the savings are often worth it.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 your money! Are you are loaded down with bills to pay each month and are wondering how you can begin a savings account for emergencies and other expenses? In other words, where can you find that extra cash to put away for later? Firstly, when configuring your budget, 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 first, it may be five or ten percent or whatever amount you decide from 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.
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. 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. Don’t get discouraged if the budget plan doesn’t 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, when budgeting your finances you need to be careful to avoid some common pitfalls that often appear.
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 your wallet.
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.
If executed properly, a personal finance budget will allow a person to simultaneously meet their expenses, place money into savings, and pay back outstanding debts. Therefore, it is in your best interest to create and implement a budget.