If credit card debt, student loans, mortgage payments, or simply personal spending habits are starting to affect your financial forecast, well. . . it may be high time to move to a more temperate climate before the rain washes everything you have away.
Financial difficulties are no joke. They take years to accumulate and sustain themselves and are often built on a heady mix of bad habits, not-so-smart habits, and difficulty making ends meet.
But setting a monthly budget that makes sense for your needs and your bills is a powerful means of getting things on track. Here are three crucial things many people overlook when setting their monthly budgets:
A Monthly Budget is a Life Plan
Eating various iterations of beans and rice for decades and walking ten miles to work to avoid paying for transit or gas are not realistic goals for a monthly budget. Yet, too many people confuse “setting a monthly budget” with “beginning a life of asceticism and extreme discomfort.” A budget is, first and foremost, a plan for your life as it is.
If you have difficulty spending beyond your means, it may require a shift in what you value or choose to spend time – and money – on. But if you are simply looking for ways to live somewhat happily within your means, then creating a monthly budget means creating a life plan.
Less Money, Less Problems
In our society, more connotes better, but this is often not the case with money. In fact, when setting a monthly budget, try a novel experiment first.
Write down all the things you enjoyed doing before you had your first job. Then write down all the things you wish you could do now. Chances are, the majority of these things do not involve money at all.
Use your budget to connect with other aspects of your life that you have not “invested in,” so to speak, and make this an opportunity to “spend” your energy and time on those things. Jogging through the park, volunteering at a museum, writing poetry: if it makes you happy, it is invaluable, right?
It is All Negotiable
Become a coupon ninja. Peruse the internet for new deals on items you have been paying the same amount for years. Groceries, in particular, can be whittled down by at least twenty to thirty dollars each month. Look into monthly passes or discounts for transportation.
If you are used to spending enormous quantities of money on your hair, look into that Costa Mesa barber everyone has been talking about. Even rent is negotiable.
Find a way to get what you need for less investment. It will make you a savvier consumer and will add up quickly when adjusting your budget.
Similarly, opt out of rewards programs, store-specific credit cards, and other such “incentives” that have you spending more money on items with very little return. Approach minimalism with an attitude of optimism and a qualitative methodology, as opposed to quantitative. Then breathe.
Tips For Resisting The Urge To Overspend Your Budget
Sticking to a budget is an important life skill. Sticking to your budget allows you to save money, avoid crushing debt and have more control over your life.
Unfortunately, staying within the confines of a budget is not always easy. Monetary temptations tempt us at every turn. Here are a few simple tips to make that process much easier.
Allow Yourself Small Indulgences
Look in your budget for extra funds that you can call your own if you haven’t already. Let yourself use a few dollars each week to buy something you like. A small box of nice chocolates, some fresh flowers or a bright little pin can make it far easier to keep to that otherwise bare-bones grocery budget.
Keep a Spending Diary
Buy a notebook or use personalized sports checks. Write down every single purchase you make each day and each week. This will be your spending diary. The diary can help you keep close track of your purchases.
Any item you buy whether it is a pack of gum, a new pair of shoes or the mortgage payment should go in here. Seeing exactly where your money is going makes it easier to know you’re sticking to your budget.
Make Sure Your Partner is on the Same Page
All spending decisions must be made jointly. There’s no point in sticking to a budget if your husband or wife isn’t doing the same thing. Discuss your joint budget with your significant other.
Make sure you both share the same exact financial goals. You should both be allotted the same amount of spending money each month. Make a point to discuss finances with your partner at least once a month to make sure you’re still sharing the same fiscal plans.
Use Free Resources
Resist the temptation to spend money by making good use of goods and services that do not cost anything. Start with your local library. Local libraries often have movies you can take out for free for several days. Libraries are also a source of free public performances and book readings by local area authors.
Contact your local government officials to find out about local area concerts and other happenings. Public parks are frequently the site of free concerts during the summer months. All you need to do is to bring a chair.
Stick with these tips. Abide by a few easy rules. You will have that warm feeling of accomplishment that you’ve stuck to your budget and met your fiscal goals.
Does Your Budget Match Your Pay?
If you are suffering from financial trouble, the question you need to ask does your budget match your pay. If not then comes the question of what needs to change your budget or your pay.
Well for most people, in the current circumstances asking for a pay rise is impossible. Most businesses are looking to reduce pay, so it is not an option. Then you need to work on your budget.
Very few people tend to budget their expenses by their paycheck. This is because; most times an individual budgeting process is discussed on the basis of a 4-week monthly period.
Even when this is taught, it is based on a calendar month based process. Now, most salary periods are bi-weekly or weekly. Hence budgeting for the month and getting paid weekly is a bit of discord.
Budgeting by paycheck
If your entire source of funds is based on your salary, then it would help if your expenses are also focused on the same. Most budgets are set up per month and balanced on a monthly income vs. expenses bottom line.
Also as most household bills come every thirty days, it’s the preferred choice. However, you are neither paid just once a month or do you spend once a month. Expenses can be daily, weekly, monthly or even annually.
Coupled with that you can have unexpected expenses that may pop up unannounced. Hence paycheck budgeting works better, as you can match your spending (variable, fixed annual or monthly) vs. your income. This can help you figure out your fixed and variable expenses and whether your income covers this.
Categorize your expenses
Once you have balanced your expenses against your paycheck, the next step would be to categorize your expenses. You should group them based on your priorities and rank them.
For e.g. paying for taxes, house bills and taxes is mandatory. On the other hand, social entertainment, eating out and other such items are optional. Also, it is always best to have long term expenses, planned out well in advance. If you do that it can help you put aside money from your paycheck to fund the for e.g. your travel dreams.
Expanding your debt
The next step is to look at your debt and look at how you can reduce it. Budgeting by your paycheck also helps to save on accruing more debt. Credit cards charge a hefty interest rate when you have left a balance on your credit card.
By balancing your expenses against your paycheck, you can pay off your credit card bills frequently. This ensures you do not have a balance left, hence saving on the accruing interest rates.
Budgeting as per your salary helps you to manage and level out your individual cash flow. This is, in turn, helps you to project better and plan for your expenses well. This also helps you realize how much you need to pay between your paychecks.
As your spending is broken down into uniform amounts and regular payments, it will be easier to know if you can spend more.
5 Sneaky Budget Busters and How to Avoid Them
Everyone sets a budget with the best of intentions. Making the budget work is the goal of the creation of a budget. Sometimes sneaky budget busters find their way into your wallet and bust your budget completely.
If you want to stay on the path to financial wellbeing you need to know what sneaky budget busters may come up and how to avoid them.
Utilities are typically budgeted for people who pay bills. Utilities are a sneaky budget buster because many times, people leave appliances and electronics on that do not need to be left on. Televisions may help you fall asleep, but they may also increase your energy bill unnecessarily.
Avoid these by making an effort to turn off all electronics and appliances when they are not in use. This may take a while, but you will get into the habit of making the rounds to turn off appliances.
Sometimes, brand loyalty can bring you down. If you have to have a certain brand of coffee or cereal, this can greatly destroy your budget. Try a brand that is cheaper if you are on a budget.
You may be surprised at how good generic brands may be, and for a cheaper price. You can possibly save thousands on household bills over a year, using generics.
When you are on a budget discount stores are a trove. You want to find the most bang for your buck so you scour discount stores for your items.
What typically happens is people overspend on discount items that they don’t need. When this happens you have busted your budget. Make sure that you only purchase what you need.
Calling a Repair Service for a Small Issue
It is worth a try to do it yourself for some items around the home. Snaking your own drain, cleaning your own gutters, and trying to unclog your own toilet can save hundreds in repair and maintenance bills.
Try it yourself if you are having an issue before you call in a professional. You may find that you have more skills than you thought.
Magazines often come in the mail only to sit on the coffee table without looking at the magazine. These magazine subscriptions cost money only to go completely unused and thrown away later.
Unsubscribe to magazines if you do not regularly read and use the magazine. You can read the magazines that you want on many other coffee tables.
Bonus Buster: Eating Out
When you are busy, you will typically have an issue with cooking. Eating out is the biggest budget buster ever. When you stop to eat out, it will cost you at least 5 USD per person at a fast food restaurant.
If you multiply this by every member of the family, you will have a large amount on your hands that could have been in savings. Carry snacks in the car and pre-make food with you in the car to stop your family from wasting away the budget.
Basic Budgeting Necessities For The Century
Setting a realistic budget in the first place can be one of the best ways to ensure you don’t need debt help, or if you have had debt help won’t have to return to get it.
It is quite common in this day and age to question where the week’s wages went, or wonder why you just can’t seem to save. The easiest way to reach your goals is to set a budget and stick to it. Nothing too elaborate, a simple budget of ins and outs will do as too many headings create confusion and are seldom conducive to good budget keeping.
Budgeting allows you transparency and a little financial freedom. Drawing up a spending plan can make the dreams you once perceived as outlandish a reality. A structured and uncomplicated budget is the way forward and prevents the necessity of debt help.
Income is all the money you have coming into an account, however, it is not as clear cut as this. Many people calculate their income before tax, medical insurance, credit card repayments, and other expenses and understand themselves to be far more well off than they actually are. Make sure to calculate your income after tax and these necessities to give yourself a better picture.
Many people who have had debt reviews or have needed debt help have blamed it on bad budgeting. On the other side of your budget will be your expenses obviously. The first of these to be calculated are the monthly ones, such as mortgages, loans, bills, insurance, etc.
Totaling this up and subtracting from your after-tax income leaves you with the amount of money you have to spend on all the other things in life – necessities such as food and car fuel included. Obviously, if the figure is negative after these you are in a lot of trouble and may need debt help?
Being dynamic and doing things like checking for better mortgages, swapping and turning in existing cards to get a credit card online with a lower rate, or turning to interest-only mortgages helps.
The first place to start is your budget. Look at the entertainment, meals out and other luxuries that you spend money on such as cable subscriptions or magazines subscriptions.
If you can’t cut enough from your budget to get back into the black through cutting these items, then you should perhaps consider selling your home or moving to a lower rent apartment or home. This may seem drastic, but it is not as disruptive as debt help and otherwise, you may be in line for debt counseling or worse.
If you are without any serious problems, make sure to track your income and expenditure anyway through your budget. Doing so with a close eye will ensure your financial fitness and overall security. Budgeting allows you to see where the needless money goes to and allows you to understand what is costing you and yet gives you no return.
Budgeting allows you to make a saving plan or look to the future with a positive outset, while allows you to cut debt, bring yourself back from the financial brink and even save a little each month for the future – a far cry from debt help.
Out Of Cash – Get More Money
Most of us do find ourselves in financial trouble at one point or the other. Irrespective of how well we may have planned our budgets. These troubles can come at any time and in any form. An accident, ill health or break down of your car or important home appliance.
Any of these can leave you in a position where you are in need of immediate cash of considerable amount. For small businesses, unforeseen issues can result in leaving them requiring a short but large infusion of quick cash. This can help get them over to the next level in their growth or take them out of business.
With today’s economy, these problems get compounded. Especially as nearly everyone around you is suffering from the same ailments. When in need, it becomes even more difficult to raise cash from your network.
Plus post the economic crisis, the banks’ lending rules have become even tighter. This makes it difficult for people to get loans to tide over an immediate crisis, whether personal or professional.
So what are your options when it comes to finding alternative forms of cash when you’re stuck?
Ask for more work, overtime or advance
If you are stuck and in need have cash, you can ask your employer to help you out. A lot of employers especially in these times understand and are happy to pitch in. You can ask for more projects to get more money.
You can also ask for more overtime, and work with other employees to take their share. Especially since overtimes are paid at a far higher rate.
You can always return the hours to your colleague later. However, if you cannot wait too long for the money, ask your employer for an advance against your next paycheck.
Short term payday loans
These are loans which you can get processed from private lenders within a day. A lot of payday loan providers get a bad reputation, due to their interest rates. Though, what you need to know is this interest rate is not so high if they are paid in time.
You would have to pay a higher interest rate than the bank. However, in return, you can get the cash on the same day, with the minimum amount of paperwork or red tape.
Irrespective of a low credit score, payday loans will provide you with the money. As most of them allow you the time period till the next paycheck to make the payment, you have enough time to return the cash.
State-funded emergency programs
With the current recession, governments have recognized the need for immediate assistance for their citizens. Keeping in line with that thought, state-funded organizations provide relief for emergency situations to people. For e.g. a number of hospitals offer relief in payments for exonerating circumstances and accept payment in installments.
Local churches and charities also offer help in providing financial assistance. The local council’s emergency team would have a list of all programs and organizations which offer you such help.
We can always plan for troubled times, however, we may still find ourselves stuck at one time or the other. However, if you keep yourself well informed you can avoid being stuck up the creek without a paddle.