Do you find yourself stretching your limits because of your spontaneous shopping spree? It's time to get your finances in control so instead of wincing when you check your bank balance; you'll be smiling with relief this time.

Once you know what your monthly income is, you can use a budget to make sure you don’t spend more than you earn thus helping to reduce debt and freeing yp cash for saving.

Budget Practically

If you are one of those who scratch their heads c1uelessly and wonder, "Where did all my money go?" it's high time you take a careful look at your budget. A budget allows you to understand where the money goes and may help you free up cash for important savings goals. Setting up a budget will require some work, but the benefits more than offset the time invested. Remember to be honest and do this well so you won't have to do it again except fine-tuning it as you go along.

The first element of any budget is your income, or how much money you receive each month. Once you know what your monthly income is, you can use a budget to make sure you don't spend more than you earn thus helping to reduce debt and freeing up cash for savings. However, you should bear in mind to budget on the bare minimal amount so those little extras that are not a fixed income should be eliminated from your budget. This way, you can be sure you can survive on your minimal wage and when those extras do come by; you can either save it or simply use it as allowance.

Next, you need to know how you spend your money. Start by tracking your spending for a month. Gather bills and receipts, and don't forget to include newspapers from the corner store and trips to the soda machine. Don't assume any expense is too small to record. Write down your expenses and break them into categories.

As an example, you can have different categories such as Fixed Committed Expenses - payments that stay the same from month to month; Other Committed Expenses - things you can't live without, like food; and Discretionary Expenses - things you like but don't necessarily need. This way, you have a clear idea on how you spend your money each month.

Debt

Credit was once defined as "Man's Confidence in Man". But in fact, the definition of credit today is more like" Man's Confidence in Himself". Using credit today means you have confidence in your future ability to pay that debt. Forty years ago, your parents may have paid cash for their homes and their cars, a largely unheard-of event today. If they borrowed money at all, chances are it was from a relative or friend, and not a financial institution. Today, debt and instant credit are part of our everyday lives. The convenience of instant credit, however, has taken its toll.

Many individuals use credit cards to spend more than they earn. If you think you may have too much credit card debt, begin to address it by honestly evaluating your spending habits. Examine your existing expenses to analyse how your money is spent. You will most likely be able to identify the problem areas where you are more likely to spend too much or too readily with credit cards. Then, based on your current spending practices, create a realistic budget to payoff your credit card debt in the shortest time possible while not adding any more debt to it.

When prioritising debts to payoff, start with the bills that have extra late-payment fees, followed by the bills without the extra charges. Remember to make the highest interest-charging debts a priority. As for smaller outstanding bills with the person you owe the money to, request to make small payments every month so your budget won't be thrown into complete disarray.

Using Credit Wisely

Using a credit card wisely means planning when and where you'll use it. However, more than anything avoids using your card for impulse purchases such as spontaneous Christmas gift shopping spree. It's a disaster waiting to happen! That's why it's best to set a budget before heading off to the stores for shopping trips. If it's personal shopping, it's wiser to use cash. The reason being, when you pay with cash, it registers quicker as to how much you've spent.

Another advice is to think carefully before saying yes to great deal offers by credit card companies such as credit card theft insurance or other types of insurance. Remember, no matter how tempting they are, good deals are only good if you really need them!

Generally, it's not a good idea to use a credit card for buying gifts of any sort. Buy gifts with cash. This may sound slightly Scrooge like; but borrowing money to buy things you're giving away doesn't make much financial sense. And, speaking of hidden fees, you should think twice before using your credit card abroad. It saves you having to exchange currency; but some Visa and MasterCard issuers have started charging on credit card purchases outside your home country so check with your local credit card issuers before using your card extensively overseas.

Finally, to use credit intelligently, you should examine the terms of the card(s) you are currently using. Keeping track of your cards, their rates, and your current balances will help you be aware of how you use credit cards.

Savings

Once you've figured out where you can cut back, you'll free up some cash to save. But remember to pay yourself first, a key rule of saving. You have to give yourself sufficient funds to go by each month and not cut back unrealistically. By setting aside a certain amount each month for savings, you can build towards your goal without missing the money. Also look into any employer-sponsored retirement plans you may have at work, which potentially offer tax benefits along with savings for the future. It might also help to set a savings goal, both for short- and long-term needs. You can have a savings dedicated to fun or travel and one more for retirement purposes or emergency needs. Remember that your budget is a living document. As your circumstances change, so will your goals and needs. Review your budget every few months to make sure it reflects your goals and to see if you are saving as much as you possibly can.