How to Keep Your Finances Under Control
The bills are out of control, the credit cards are maxed-out, the bank account is negative and the US economy is in the tank. What has happened here? Read on, grab hold of your financial life preserver. Yes, you too can fix this awful mess that your finances suffer from. Be prepared to make some subtle and not so subtle changes to your life, the key to success in financial freedom is to make a few sacrifices in your spending lifestyle. Your family also needs to understand this and to back you up during these changes.
Are you ready to make some changes? Let's GO!
Money Sense Psychology
The most prevalent reason for financial disasters is how gullible we are about handling our money and how we readily accept the falsehoods and half truths given to us when it comes to spending. Now you must take a close hard look at your decisions regarding finances as well as those people who influence you in money matters. These people could be family, friends, advertisers, trusted professionals and the worst offenders are media groups, TV, Radio and Print.
Look in the mirror. Do you convince yourself that the bank account is really OK even though your getting overdraft notices in the mail? You know how much your paycheck is worth each week, but do you spend more than that paycheck each week? Now here is a tough love kick in the shins, you need to stop fooling yourself as only a fool can fool himself.
When it comes to your personal habits, try the following.
- Always keep a mental note of how much you earn each month, including your spouse's income if available.
- Burn your credit cards and switch to a cash only system.
- When spending money ask yourself, "Do I really needs this item, or can I get by without it?" Be honest with yourself here.
- Rather than spending money on an item, can I produce it myself at a cheaper cost?
- Never spend more than your disposable income during any particular month.
- Don't let family convince you to spend more than the family earns each month.
- Once your out of debt, put money into a forced savings.
Be Stubborn, stick to your beliefs and don't let anybody sway your need to stay within your budget. These tips are discussed in more detail later on.
Make a Common Sense Budget
A common sense budget is really very simple on the surface. Simply, never spend more than your earn! Too simplistic you might say? List your income and expenses into these four categories.
- All income money added up on the left side of your sheet.
- In another column list all absolutely necessary bills; Rent, Mortgage, Car Payments.
- Next column list all items as important but could be reduced in cost; Phone, Cable, Internet, Food, vehicle types, entertainment.
- Finally, list all items that are probably not needed, and be honest with yourself.
Now then, add up all the items in number 1, then subtract all the items in number 2. Do you still have a positive number? Great! If not, then you need to downsize your home, trade your car for a less expensive vehicle or take advantage of public buses. Taking in a roommate or two helps tremendously with expenses. Just make sure that roommate is a responsible person.
Next, subtract all items in number three. Do you still have a positive number? Again wonderful, but if not then you need to cut your Internet and cable to a cheaper service, get a pay as you go cell phone or maybe no cell phone at all. Do you really need 4 vehicles in a two person family? Sell the unnecessary vehicles, you can't afford them. How often do you eat out during the month, cut out most of the entertainment and start cooking classes. You will live longer and have more money to spend.
Finally, do you really need to spend money on loser items or projects listed in number four? Gambling, lotteries, cigarettes, expensive habits legal or otherwise, obsessive hobbies, expensive entertainment could all be eliminated from your budget if you had the will to do it.
Once you have eliminated all the unnecessary items in 3 and 4, you might find that there is some money left over. OK, here is the really tough part, put half of that excess into a savings account for rainy day situations. Take the other half and pay off your credit card bills. If your credit card bills are more than 10 percent of your yearly income, then put all the excess into paying off those credit card bills.
Be creative with how you purchase items. Can you cook a meal? I mean really cook a meal not microwave a TV dinner. Buy a large quantity of meat on sale at the local supermarket, like a 9 pound ham for about $18. Now that sounds like a lot of money but not when you realize that it makes 3 dinners for two people, 6 ham and cheese sandwiches, ham and bean soup for four more meals, and the dog gets scraps for over a week. That amounts to about $1 per home cooked meal, isn't that better than a single $8 burger with french fries and large coke clogging your arteries? Speaking of grocery markets, make a list of absolutely needed items at the store and don't buy impulsively. Go to the web page for your local supermarket and look up the bargains for that week. Try coupon web sites like http://www.supermarketcoupons.com/ for valuable coupons from markets and manufacturers.
What about that high end cell phone service or could you get by with a Skype or TracFone at much cheaper costs. Do not forget the bargain stores like Dollar Tree or Dollar General, these stores have many discontinued and overstocked items that are true bargains.
For more valuable budgeting tips please read Shopping for Food by Don Fairchild.
Do Not Give Up
Ask your family and friends to support you on your financial freedom. Be creative, find ways to do things in a no cost way. Don't give up and try to shave off more and more expenses every month until you have a surplus going back into your savings account.
Good Luck, may the budget be with you!