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How To Overcome The Most Common Obstacles To Budgeting

man stressed with papers and calculatorYou know you should be budgeting. Your heart tells you that you should budget. You know you would be happier and less stressed out if you had a budget. So, what are the most common obstacles that are keeping you from budgeting and how can you overcome them? Here are some answers to these questions that could help.

Procrastination

There was a study done by The Journal of Clinical and Experimental Psychology that found that procrastination is usually a problem of self-regulation. This means if you are a chronic procrastinator, it’s likely because you’re probably easily distracted, disorganized and have weak planning or goal setting skills.

Unfortunately, these are exactly the type of negative behaviors that will not only cost you money by delaying your budgeting but will actually impede your overall progress in life. If you are a chronic procrastinator, you probably have a hard time with subjects that you find difficult or uninteresting and budgeting is no doubt one of them. Fortunately, there are some tactics you can use to change your habits whether they are financial or otherwise.

As an example of this, if you find the idea of making and sticking to a budget overwhelming, try breaking it down into smaller pieces. This makes it possible for you to tackle budgeting a bit at a time – and then feel good after you have achieved some small steps. If you use the financial tool Mint.com you could use its automatic budgeting tools as a starting point and then adjust your budget gradually over time as you learn more about your spending. Once you have your budget in place and working, you could then use gentle reminders tp help keep you on track lest those nasty, old habits of procrastination take over again. The reminders you set on Mint or your smart phone’s calendar are very important self-discipline tools that can help you achieve that bigger goal.

Watch this video for more tips on defeating the bugaboo of procrastination.

 Fudging the numbers

Have you been kidding yourself in terms of how you spend your money? For example, you might think – off the top of your head – that you’re really not spending all that much money on food. If you create a budget, you may find that you’re spending several hundred dollars more a month than you had thought. In other words, you’ve been fabricating or fudging the numbers. If you’ve been wondering why your savings are not growing as quickly as you had hoped, this could very well be the reason. When you fabricate your numbers, this helps you avoid the unpleasant reality of your financial habits. But whom are you kidding? If you turn a blind eye to your spending, this won’t change your bottom line. What you need to do is take stock of what you’re actually spending by keeping your receipts and logging all your spending for several weeks. If you don’t do this, you’re just deceiving yourself.

Busting your budget

When you want to feel good now, breaking your budget and fudging the numbers can help you achieve that. But would you really rather avoid unpleasant truths and splurge today instead of dealing with the long term? When you do this, you’re really forgoing bigger pleasures down the road. You may want quick gratification and be ignoring the benefits you could enjoy later. Psychologists call this “present bias” and it impacts your ability to realize that the $5 latte you drink today can cost you much more money later. If this is your problem you can change it by focusing more on the bigger picture. Psychologists say that you should visualize your goals as clearly as you can. Try imagining how you would actually feel when you can afford a new car or to retire comfortably. Then, think about how you’ll feel years from now when you haven’t met your goals. Ask yourself if the disappointment of not being able to get that car or retire comfortably is worth the small pleasure of buying a latte today.
What psychologists also say is that what we’re really craving is a feeling of novelty and variety and splurging is just a way to achieve this. So, if you get the urge to overspend, look for new forms of stimulation. Workout or go for a drive. Call up a friend, put on some music you love or work on a hobby. The point is to do something that will re-set your frame of mind and provide that thrill and rush of endorphins that you’re really seeking. The truth is that spending is just a fast fix that will leave you poorer– and probably no happier – in the long run.

There is help available

Creating a budget these days is much less difficult than just a few years ago thanks to the software and smart phone apps now available. Using one of these could help you overcome the procrastination hurdle of budgeting because it can make creating a budget so fast and simple you’ll hardly know you’ve created one at all. We especially like the tool Mint.com that we mentioned earlier. It’s free and available for use on computers, iPhones, iPads, Android devices and even Windows phones. What makes Mint so helpful is that all you have to do is type in the numbers of your checking and savings accounts, credit and debit cards, loans and investments. Mint will then aggregate all of your information and present it to you as one easy-to-understand picture. Mint will automatically organize your spending into budget categories for you – saving you the time and brain damage that would be required for you to do this yourself. You can set spending limits in each category and Mint will send you email alerts anytime you overspend in any of them. It will even alert you if it finds a financial product such as a credit card that’s better than one you’re currently using.

More helpful apps

Another helpful app for saving money – especially for people who don’t know how to create a budget – is LearnVest. It lets you sync your savings and investment accounts together and then get an overview of where your money goes. It will categorize your expenses, show you how much you spend on restaurants and travel and then track your progress so you can see if you’re staying within your spending limits.

Three other popular budgeting tools include You Need A Budget (YNAB), AceMoney and MoneyDance. YNAB costs $60 and is designed for use on a computer. AceMoney is $34.99 and MoneyDance is $49.99. AceMoney is unfortunately not available for use on Apple products but MoneyDance is.

Of course, these are not the only financial apps available. They are the most comprehensive. There are also apps available that are more single-minded. For example, if you have a hard time sticking to a budget, you could try Mvelopes. It’s based on the old tough love strategy for budgeting where you create envelopes for your categories and then add the money you budgeted for each category into its “envelope.” The tough love part comes in when you’ve spent all the money in a category, as the program will then block you from spending any more money in it.

To pay down debt

Finally, if your number one goal is to pay down debt there are several apps designed to help you do just that. One of the best of these is called Ready For Zero. It’s available for use on the iPhone and is said to be great for tackling credit card debts, student loans and other personal loans. You use it to track all of your debts as you pay them

How To Reduce Your Spending

Pair of scrissors cutting the word SpendingIs your most important goal to get out of debt or to buy a new car? Would you like to buy a house or a vacation home or send your kids to college? Regardless of what your goals are, you need to know how to cut your spending so you can put away more money to realize them.

It all begins with goal setting

It’s tough to know how much you need to put away every month until you’ve defined your goals. Let’s suppose one of your short-term goals is to get out of debt and that you currently owe $5,000 on three different credit cards. If you want to pay off all that debt in two years, you will need to make payments of about $208 a month. This means you will need to cut your expenses by that much or more.

Reducing your spending

Now that you know how much you need to decrease your spending, the next step is to make a budget that will get you there. You may want to use an online budgeting tool or smart phone app such as Mint.com or You Need A Budget. In either event, you’ll want to track your expenses for two to four weeks so you can see where your money is going. Once you do that, it’s time to sharpen your pencil and start making cuts.

The low hanging fruit

You’ll find that some of your expenses such as your rent or car payment will be difficult to reduce short term. But there are areas where you should be able to reduce expenses almost immediately. They’re what I call the long hanging fruit. For example, how much do you spend a month on groceries? I’ll bet you can cut that by at least 20%. There is any number of books available on Amazon and Barnes & Noble that could teach you how to eat more frugally.

Another area where you should be able to reduce expenses is in entertainment. How often do you eat out, go to movies, or just hang out with friends at a club or bar? Chances are you could save as much as $100 a month just by cutting back on entertainment.

Check out your other categories

Take a hard look at every category in your budget. I’m willing to bet there are other areas where you could easily reduce your expenses. How about clothing? Do you really need to spend an average of $150 a month on clothes? Probably not. How about your cell phone plan? Could you get by with fewer minutes and less data? I have an AT&T plan that gives me the minimum amount of data. The way I can make this work is by using my iPhone to access the web as much as possible via a Wi-Fi hotspot so that I’m not connecting through AT&T. Another area where you might be able to decrease your expenses is your auto insurance. Go to a site such as esurance.com and get some competitive quotes. You might be surprised at how much you could save just by switching companies.

I admit that learning how to decrease expenses can be tough and not much fun. But if you just keep reminding yourself about the goals you’re working towards, you should find it a bit easier.

How to decrease your debt

If you feel like you’re sinking into a quagmire of debt, you should know that there is help available. There is a company that can probably decrease your debt by 50% or more and help you become debt free in just 24 to 48 months. You can get more information by calling our toll-free number or by filling out the free quote form on this page.

Make Budgeting Like A Football Game

budgeting money to conquer debtIf you’re any kind of a football fan you know that the game is played in four quarters. But did you know that you could also divide your budget into four quarters? This is because of what’s known as the “25% Rule to Budgeting.” If you follow it, you’ll find that balancing your personal budget will be less tedious and less time-consuming. While budgeting has become much more challenging these days, the “four quarters” approach can simplify things for you considerably.

It’s a zero sum game

Like it or not, household budgeting is a zero-sum game. In other words, you only have so many dollars available before you have to either drain your savings account or pile on debt. To make matters even worse, most financial management is done through hindsight – or after your mortgage payments have been locked in, your spending patterns have become ingrained and you’ve already racked up debts. This can make you feel as if your budget was more like a diet that a menu.

A better way

Fortunately, there is a better way to handle your family budgeting. First, divide your before-tax income into four quarters or four equal parts. Then group the expenses your income must cover into four categories: housing (rent or mortgage), taxes, debts (excluding your mortgage payment) and living expenses.

The first quarter

You are going to be taxed. There’s just no way around it. This will include federal and local taxes, your Social Security and Medicare, etc. Consider this to be a bill that would equal one quarter or 25% of your pretax income if you were a moderate earner. Make sure you also take into consideration your retirement contributions and any other payroll deductions.

The second quarter

Your second 25% will be for housing. Whether you rent or own, you need to limit your monthly housing payments to no more than 25% of your pretax monthly income. To put this another way, you should figure that one week of your salary should equal your mortgage payment or rent.

The third quarter

It’s also important to limit your monthly loan payments to no more than 25% of your monthly salary. If you will need additional credit, you need to keep your total debt obligations as close to 30% as possible. In fact, there is an inverse ratio at work here. As the percentage of your debt obligations go up, the less likely it becomes that you will be able to get new credit.

The fourth quarter

You’ve now used up three quarters of your salary in taxes, rent or your mortgage payment and your debts. This means your last quarter or 25% will need to take care of everything else, including groceries, gas, entertainment, clothing and putting money away into an emergency savings account. If this were the best of all worlds, your emergency fund should be equal to six months’ worth of rent, debt and living costs. If you can’t do this, at least shoot for three months’ of living expenses.

If it doesn’t add up

If you find that you can’t live on 25% of your monthly income, you will need to take another pass at your plan and try to adjust whatever allocations are within your control – which should be everything but taxes. For example, you might need to move to a less expensive house or apartment or get a roommate. Or maybe you will have to wait on some upcoming purchase – especially if you would need to finance it.

Finally, if your debt obligations are already close to the 30% danger limit, you will have no choice but to find ways to cut the other two categories in order to accommodate that reality.

You may need a cash journal

What this boils down to is that trying to juggle a long list of expenses is tough to do unless you have a good sense for how they all fit together, the limits you will need to set for each category and the strategic trade-offs you may have to make. If despite all of your good efforts, you’re still not making it to the end of the month, you may have to keep a cash journal for 30 or 60 days. This is where you write down every single expense you make and in whatever form it took – whether it’s by check, cash, credit card or debit card — and for what ever reason you made the expenditure such as food, gas, laundry, groceries or whatever. What this will do is help you find the “budget busters” in your spending so that you can get back on track.

What to do about those budget busters

Once you have identified your budget busters, there are some things you can do to eliminate them. For example, if you find that your biggest problem was impulsive spending, try instead to be impulsive about paying off your credit card bills rather than just waiting until their due dates. If you can make early or multiple payments, this will mean paying less interest and a quicker pay-down.

Did you have a tendency to forsake your budget completely after you made one or two blunders? You could actually turn this avoidance tendency into a positive behavior. For example, you could automate your contributions to your retirement account, emergency fund and other savings account directly from your paycheck. That way you will not be able to abandon your financial goals, despite whatever the temptations might be.

Spend but get paid for it

credit cardsIf you feel that you can be responsible in how you use credit, you could turn your budget busters into cash in the form of cash back credit card rewards – especially if an unequal amount of your budget goes to groceries, fuel or travel. Also, many credit cards offer additional value in the form of travelers insurance, car rental insurance and so forth.

Make a contribution

Another way to handle those budget busters is that every time you give in to a temptation, make a three-dollar contribution to your savings account. This may not seem like much but over time it will add up.

Ensure that your home continues to be an investment

Whether you rent or own, you should take a home inventory so that you will have an accurate value of your possessions. When you have determined that figure then make any necessary adjustments to your homeowner or rental insurance coverage. In addition to your 2014 budget, you should also have` a property maintenance calendar. These will not only allow you to cover your maintenance expenses, it will reduce the possibility that you’ll be hit with unexpected repairs. In addition, if you set a maintenance schedule for your major home appliances and systems – think heating, refrigerators and cooling units – you will reduce your monthly utility bills and help maintain your home’s value.

Document your improvements

If your budget can include some larger improvement projects, be sure to take before and after photos and organize all of the documents you have related to those purchases. This will help you with your taxes and when it comes time to sell the house.

Do you have a problem with  resolutions?

If you are like most of us, you may find that you have a problem sticking with your financial resolutions. We read recently that only about 55% of us actually keep our New Year’s resolutions for six months. If you’re normally part of the 45% that don’t, here’s an infographic that could help you stick to your resolutions this year. Who knows, a new outlook might be just the thing to help you accomplish all those goals and resolutions.

Where Smart Money Management Begins – Setting Goals

happy familyHave you taken a hard look at your personal finances recently? Now, while it’s still early in the New Year would be a good time to review what you accomplished last year and to think about what you could do better in 2014.

The importance of having goals

We hope you have a budget because budgeting is the only way to control your finances. If you don’t have a budget, you can’t know where your money’s going. And if you don’t know where your money’s going, it’s just about impossible to be a good money manager.

Many people start the New Year with good intentions – to sit down, analyze their spending and make a budget. But most financial experts say that’s a mistake – that if you truly want to develop and stick to a budget the first thing you need to do is set your goals. What do you suppose is the goal of all 32 NFL coaches? It’s the same thing, to get to and win the Super Bowl. This is what keeps them motivated throughout all those days of off-season activities, workouts, coaches’ meetings, film reviews and all of the hundreds of other tasks associated with coaching a pro football team.

You might never coach an NFL team but you also need goals to stay motivated and on track.

First, create goals

Many people start by keeping track of their spending for a few weeks or a month and then make a budget. Unfortunately, these people are almost doomed to fail because that’s not how to start. You need to first create goals. If you haven’t identified goals it’s a lot like trying to drive through a strange city without a map. You not only wouldn’t know which streets to take, you might not even know when you’ve reached your destination. In fact, you really need short-, mid- and long-term goals.

The three types of goals

These are goals you can realistically expect to attain within the next 12 months like saving for a vacation, redecorating a bathroom or paying down your credit cards. Mid-term goals are those that would take one to five years to accomplish such as paying off all your credit card debts or student loans or getting a new car. Long-term goals are those that require more than five years to achieve like a college education for your kids or a great retirement.

One success leads to another

When you have these three types of goals, you’re more likely to succeed because they tend to work in coordination with one another and one success leads to another. As an example of this, suppose that saving for a house is one of your mid-term goals. This then would be the foundation for your long-term goal of being a homeowner.

The first important ingredient

The first important ingredient in successful goal setting is that they need to be attainable and are not too far out of your reach. If you only set goals that are in the far future like retiring at age 55, you could get frustrated as the months and years go by and you don’t see that you’re making real progress towards achieving them.

A good way to set and remember your goals is to think S.M.A.R.T.E.R.

S = specific

First and foremost your goals need to be specific so you can create a plan (budget) to accomplish them. You should use the Ws or What you want to accomplish, Why you want to accomplish it and What’s involved such as “I want to be totally debt free in two years.”

M = measurable

Your goals also need to be measurable as in a specific amount of time like “I will pay off my first credit card before September 15.”

A = action

This is how you will take action towards achieving a goal as in “I will pay $200 on that credit card bill every month beginning the 15th of this month.

R = realistic

It’s important to have goals that don’t set you up to fail, which can happen if you’re not realistic. In the example given above, it wouldn’t be realistic to pay $200 a month on that credit card bill if you have only $150 a month available after your monthly expenses.

T= time oriented

This means setting a reasonable amount of time to achieve your goal. You might want to be debt free in two years but is this a reasonable amount of time given your financial situation? If not, you’re bound to fail, which could throw you completely off track.

E = evaluate

Be sure to sit down and review your goals on a regular basis. Are there changes you need to make? Now that you’ve had time to work on a goal such as becoming debt free in two years, you might see that this just isn’t realistic.

R = revise

When you re-evaluate your goals periodically, this offers the opportunity to revise and make changes in them depending on what you’ve learned since you created them. If it seems you just won’t be able to accomplish one of your goals in two years, you could revise that to three – instead of losing hope and giving up.

There’s another acronym for success in setting and achieving goals called S.M.A.R.T. as explained in this short video.

Be flexible

Your financial goals should also be flexible so that you can change them as the economy and your financial situation change. The goals you set when you are in your mid-twenties might not be at all relevant by the time you reach fifty. Maybe one of your kids decided on a career in the military instead of going to college so that your college fund has become less important. Maybe you’ve become so successful that you’re no longer worried about saving for retirement. Or maybe you’ve suffered a traumatic event like a divorce or death. The point here is that you need to be flexible so you can make revisions to your goals as your life changes.

Have a to-do listHow To Invest To Grow Your Personal Wealth

If you haven’t already discovered this yourself, we have bad news. New Year’s resolutions generally don’t work. Many experts believe that a better way to start the New Year is with a to-do list. It should be both discrete and actionable as suggested in an above paragraph. The items on your list also shouldn’t take very long. Then, as you tick them off one by one, you should be able to see a nice improvement in your finances. Having said that, here are five things you could put on this year’s to do list:

Get a record-keeping system. The best of these are Quicken and Mint. However, there are other good applications such as Mvelopes, Spendee and and Budgt that you could use on your favorite device and become a better financial manager.

Learn one new thing every week. What’s a debt-to-income ratio or a price-earnings ratio? How much life insurance do the experts say you should have? What’s a 529 plan? The more you learn about financial topics such as these, the better you will become at managing your money.

Increase your 401(k) contributions. Your employer may have increased the matching contributions it makes to the company’s 401(k). Add as much money to the plan as you can afford that your employer will match. This is not only a good way to save for retirement but will also save money on your taxes.

Get a better credit card. If you’re using the same credit card that you’ve had for years, you’re probably not getting the maximum amount of rewards. The card issuers have been increasing their rewards programs in recent years. Go to a site like lowcards.com or bankrates.com and see if you can’t find a card with better rewards and that suits the way you spend. You might also get a second card from a different credit card issuer so that you won’t be card less in the event your primary account gets hacked and canceled.

Comparison shop. Whether it’s your automobile or homeowner’s insurance policies, your cable provider, your entertainment or your health insurance, you need to shop around. However, don’t think that you have to do this all at once. You could devote January to comparison-shopping for your automobile insurance, then February to shop for health insurance on healthcare.gov. Then in March, you might review all of your television costs to see whether you might be able to cut the cable and go to a cheaper streaming device like Chromecast or Apple TV. April might be a good time to look at how much you’re paying for utilities and if there could be a more energy efficient solution that would save you money … and so on.

How to Jump Start Your Family Budget For 2014

calculator with text how muchDid you notice what happened to JC Penney? It started when the company hired a new CEO who had been in charge of Apple’s retail operations. His name is Ron Johnson and he apparently believed that he could turn JC Penney into an Apple-type store. The problem was that he couldn’t accurately foresee the consequences of this major change, which caused the company to lose most of its customers and is still trying to dig itself out from under the rubble this caused.

Budgeting

If you’ve been budgeting this past year or for even a few months, you should now take a few minutes out of your holiday festivities to reflect on the consequences of your spending and how well you were able to achieve your goals. Here are three tips that could help you jumpstart next year’s budget to make things even brighter.

Review your expenses

If you have been budgeting, you should be able to easily access information about last year’s spending. If you kept everything together, now would be a good time to sort it out so you will better know what you spent and where you spent it. If you haven’t already created categories for your fixed expenses such as your rent or mortgage, auto loan payment and so forth, you should do so. You should also have categories for your variable expenses, which would include your cable, cell phone service, Internet, and utilities, as well as your other household expenses. If you have a problem creating categories for your variable expenses, here’s a list of the major ones that could help:

  • Home (repairs and maintenance)
  • Utilities
  • Food
  • Family obligations
  • Health and medical
  • Transportation
  • Debt payments
  • Entertainment/Recreation
  • Pets
  • Clothing
  • Investments and savings
  • Miscellaneous or discretionary spending

Of course, these are just the major categories. You can certainly add any other categories you would care to use.

Discretionary spending

One of the most critical categories listed here is discretionary spending. These are purchases you can control. They include everything from a manicure to dining out and from a drive-through latte to a donation to an office party.

The next step

Once you have your categories lined up, it’s time to total them up both by month and for the entire year (or whatever portion you were budgeting). There are two reasons for this. First, this will help you see your patterns of spending and second, you should be able to find at least one category where you could make improvements. You may be able to see patterns that could be anything from a peak in spending in certain months to those dozens of cups of drive-through latte you never realized you had purchased.

Savings progress and your goalswoman inserting coins in piggy bank

Your lifeline is your savings and you should have more than one savings account. If you weren’t able to save as much as you had hoped this year, you should pledge to make 2014 better. Do you have an emergency savings account? That’s critical and it should be at least three months of living expenses set aside in the event you lose your job or suffer some other awful event. Six to nine months’ worth of living expenses would be even better but it’s critical that you have at least three. Do you have just one savings account and dip into it as required? Then you should make creating a separate emergency fund a top priority.

This is where knowing where you spend your money comes into play because it’s where you should be able to see money that could be redirected into your savings. The fact is at least a part of your spending should be in a savings account drawing interest and not in the cash drawer of the store you gave it to. Given this, you need to go back and find those areas where you could cut your spending and add to your savings. Since now is a time of New Year’s resolutions, this would be the perfect time to create new financial goals for 2014. Creating an emergency savings account would be a great beginning but you also need to be saving for college, retirement or that 10-day vacation on Fiji. This means that when you’re creating a new budget for next year you might want to think about setting some extra goals.

Install new financial software

There is an abundant number of smart phone apps and software that could help you get into better shape physically and there are also ones that can help you become more fit financially. Keep in mind that all software is not created equal. You will want a program or application that makes budgeting simpler and not harder. We like Mint.com because set up takes only a few minutes. You can easily add all of your accounts and the software does the rest. It will let you make a budget with different goals and then see your daily progress. It makes it easy to tweak your budget anytime you want or need to. By the time December of 2014 rolls around, you should find it easier to evaluate the year and set new goals.

Mint is great because it takes the difficulty out of budgeting. It can be used on your computer but also has mobile apps for smartphones and tablets. This makes it portable and shareable between devices. We suggest you sign up for Mint today because it’s free and could help make 2014 your best financial year ever.

Other apps worth considering

In addition to Mint there are some other smart phone apps you might want to consider that do only one thing but do it very well. For example, the app Ready for Zero can help you become debt free. The way it works is that you create a plan to pay off your debts. Ready for Zero will then display your payment progress and even provide you alerts when necessary to help keep you on track.

Your bank may have an app that would allow you to check your statements online, transfer money between accounts, pay bills and even track your spending. If your goal is to save money on your groceries, the Coupons App includes a coupon database along with a widget that will deliver daily deals directly to your phone. It also has a barcode scanner that enables you to compare prices and when you have a coupon all your have to do is show it on your phone when you check out at the register.

Finally, there is SigFig, which is a good introductory app for investing if you’re just getting started. It puts all of your investing information together in one place and offers advice that could help you save money on hidden fees or bad investments.

6 Tips For Simplifying Your Financial Life

Smiling woman with pen, paper, calculatorThe year 2014 is just about here – making this an excellent time to think about your finances and what you might do next year to simplify them. If you don’t already have a household budget you might want to make a New Year’s resolution to create one. Having a budget is really the only way to stay financially sane and keep your spending under control. Beyond this, there are some simple things you could for simplifying your financial life and reducing  the amount of time you need to think about your finances.

1. Setup automatic bill paying

You probably have better things to do with your time than paying bills on paper. Set up automatic bill paying instead. You can pay almost all major credit card bills automatically online as well as your utilities. For that matter, you should be able to set up automatic payments for any of your bills that are the same every month including your automobile insurance, mortgage or an auto loan. Doing this will save you both time and energy. However, there is one major exception to paying online and that’s landlords. If you rent, you probably mail a check to your landlord or just give it to him or her in person. You might ask if your landlord uses an online payment service, which would allow you to pay your rent automatically every month. If it doesn’t, it might be worth asking if it would make the switch, as this would save both of you time.

2. Save automatically

If you’re not doing this now you really need to put away money for things you want to do in the future before you use it to pay bills or for your discretionary spending. It’s easy to set up an automatic transfer from your checking account to your savings account if they’re both at the same bank. If you have a brokerage account, you should even be able to set up an automatic transfer to it. The best thing about saving this way is that when the money is subtracted from your paycheck before you see it, you might not even miss it. You’ll have a bit less money to spend but you should be able to adjust to that and you will be making progress on your savings goals. If you earn a bonus or commission or get a nice Christmas check from Aunt Grace, be sure to stick this money into your savings or retirement account, too.

3. Use cash or debit cards instead of credit cardsAndrew Jackson on $20

The big problem with credit cards is that they make it easy to overspend. So instead of using them, try taking out a certain amount of cash at the beginning of each week for your discretionary spending such as shopping, eating out and going to the movies. Then, when you run out of cash for the week, that’s all the spending you can do. You say you hate to carry a lot of cash around? Then try transferring your weekly spending money to a bank account where you could have a debit card and then use it to make all your purchases. This will not only help you manage your money but also provides an easy way to track your spending – online and in the form of the paper statement you get at the end of every month.

4. Shop around

Have you been paying the same amount for your Internet, cable or phone service for more than a year? If so, you’re probably paying too much. You should go online and look for packages of services in your area you would like and that would be cheaper than what you’re now paying. If you do find one that appeals to you, call your current service provider and ask if it would be willing to match the promotional price you could get if you were to switch services. To save more on your Internet costs, go online and buy the router you’re currently renting from your provider.

Most cable companies charge for each device they give you. When you know which provider you will be using, go online and buy a compatible cable box. Satellite and cable services usually charge $5 to $10 per box. If you can buy the whole device for around $50 you’ll save money by eliminating that recurring monthly fee.

5. Cut out unnecessary expenditures

Sit down, take a few minutes and review the services you pay for every month. Ask yourself if they’re all really worth what you’re paying for them. Think about that cable bill, cell phone bill, music subscription service, etc., and whether or not you’re really getting your money’s worth out of it. If you find there are services you don’t really need, just cancel them. There are others where you might be able to downgrade. For example, if your cable package includes 500 channels, ask yourself if you wouldn’t be just as happy with fewer of them. If so, you might switch to a package with 100 channels.

Do you pay for super-fast Internet? Do you really need it. Unless you and several family members are doing a lot of video streaming or use other streaming-heavy services such as online games, you might be able to drop down to a slower Internet speed. This would save you money and you might not even notice a difference in your Internet’s performance.

If you like your current phone consider switching to one of those pre-paid plans where you get to keep your current phone but you’re not subsidizing an upgrade to a new phone that you don’t need right now. If you need a subsidized phone sometime in the future, you can always return to that original phone plan.

6. Use credit cards to make budgeting easier

Some of the financial gurus like Dave Ramsey suggest that you use a cash envelope system in your budgeting. This is where you have an envelope for each of your categories such as food, housing, entertainment, gas, etc. You put cash into each envelope every payday based on whatever you budgeted for that specific category. When an envelope’s empty, that’s it. You can’t spend any more money in that category. Some people call this the “tough love” of budgeting.

The advantages of using credit cards for your budgeting

Despite what we said in tip #3 there are some advantages to using credit cards in your budgeting – assuming you have enough self control to use them sensibly. For one thing, when you use a credit card, this gives you a sort of real-time accounting of your spending. You can see exactly what you’re spending and where you’re spending it. Many credit cards will even categorize your purchases for you on your monthly statements.

Lack of documentation

On the other hand, cash can be a nightmare to track. It’s just way too easy to lose track of cash. You know the old saying about cash burning a hole in your product? That’s because it’s just so easy to fritter it away. Plus, when you use cash there is no documentation of how much you spent and where you spent it. But if you use a credit card, you will have a paper trail of your spending altogether in one place – either in your monthly statement or online.

Use a rewards card

In addition to this, if you have a rewards credit card and use it in your budgeting, you can accumulate points for everyday purchases that you wouldn’t earn otherwise. Pay your utilities, rent, cell phone, cable and other monthly bills with a rewards card and you will earn an enormous amount of points every month – while still budgeting.

Choose a charge card instead

If you get nervous at the idea of using a credit card in your budgeting, think about using a charge card instead. The difference between the two is that with a credit card, you can roll over your purchases from month-to-month and only make a minimum payment. In comparison, a charge card requires you to pay off your total balance every month. If you use a charge card such as American Express, you can build credit, budget and earn rewards points while not having to worry about going into debt.

Here’s a video with more benefits for using credit cards in your budgeting, along with information about the simplest way to keep your spending under control that we’ve ever seen.

How To Be A Gifted Gift Giver – And Without Breaking The Bank

Young woman holds a gift wrapped in red paper, isolated on whiteThe holidays are rapidly approaching and with them come the need to buy gifts. Unless you’re from the planet Neptune, you’re probably worried about this. Will your family and friends love your gifts or will they be disappointed? Will you break the bank by spending too much money and end up with a January hangover? How about food as gifts or for a family dinner or office party? The fact is that whether we like to admit it or not the task of choosing gifts can be nerve-racking, stressful and can take a lot of the joy out of the holidays. But it doesn’t have to be if you follow the advice in this article.

Tips for making gift giving decisions

While choosing the right gifts for your family and friends can feel overwhelming, here are two principles to follow that could help.

First, if you want to make a good decision, you need to identify your underlying concern. Is it important that your children or grandchildren end up feeling that they were treated equally? Do you have a tight budget and are concerned about affordability? Do you want to give unusual gifts that that will be memorable or something fun and whimsical?

Next, go out in the world to see what’s available. Now that you understand your underlying gift giving concerns, go shopping, attend craft fairs, go to antique malls or whatever to see what solution options are available. In other words, don’t just sit home trying to think what gifts would be appreciated. Check out stores like World Market where you’re likely to find dozens of inexpensive and whimsical items you’d never think of when sitting at home in your favorite arm chair.

The moral here is that before you make any gift buying decision, clarify your underlying concerns and make a plan of action. Then go out and explore your options.

Avoiding those psychological tricks that stimulate impulse buying

It’s easy to get caught up in the fun and excitement of holiday gift buying. But when we do, we open ourselves to buying stuff on impulse. And believe us, today’s retailers are masters at “tricking” us into impulse buying. In fact, whenever you go shopping you will likely be subjected to a multi-pronged sensory campaign designed to get you to spend more. However, you can cut down on this by understanding and recognizing the psychological signals used by many retailers.

Here’s one example of this. Retailers know that colors create more than just a scene. They can influence our moods and perceptions. Red energizes and stimulates – even our spending. If you don’t believe this, one recent study found that waitresses wearing red got 14% to 26% higher tips than waitresses who didn’t. And another study found people on eBay bid more assertively for products that were shown against red backgrounds than blue backgrounds.

Or take smells. They have a unique ability to remind us of memories and moods. Many retailers know this and use scents to enhance our perceptions of their products and brands.

Music has the power to stimulate our buying. If you don’t believe music doesn’t create moods and intensify emotions, try watching a move without the soundtrack. A song such as “Have Yourself A Merry Little Christmas” can get us into more of a holiday mood – and the mood for spending.

Nostalgia is also a powerful stimulate. It can transport us from the present back to a time that was more positive and where we felt more in control. It can cause us to feel more connected to others, more positive and more into the holiday spirit, which can cause an immediate bump in our gift buying budget.

You can break the appeal of these psychological symbols just by being aware of their effects. Plus, it’s always best to have a shopping list and to make sure you take occasional shopping breaks.

How to avoid breaking the bank

It’s not necessary to break the bank when you’re gift shopping. There are simple rules you can follow that will help you be a good gift giver and without the fear of overspending.

Use empathy

The first thing to understand is that our gifts should be based on what you think the recipient would want and not what you want to give. You might think a red sweater is just the best thing since sliced bread but if you choose red for everyone’s gifts you may have an epic “gift fail.” Try to determine which presents would make the receipients the happiest. Look at the world through their eyes. Think about the person’s hobbies, habits and interests and select your gifts on this basis.

Don’t believe that your gifts have deep symbolic meanings

There are times when a diamond does mean forever but watch out for those overly analytic advice columns, which suggest that gifts have some deep symbolic meanings. You will find gift buying a lot less stressful if you don’t worry about what the present says to its recipient about your relationship to that person.

Give yourself enough time

If you wait until the last minute to do your gift buying you’re almost certain to have a disaster. You need to keep an eye on the calendar but at the same time, it’s okay to leave some leeway for last minute sales. Why buy a toaster oven at 15% off when you believe the store will mark it down 25% next week? It’s okay to play some “discount roulette” but be careful you don’t wait too long as that oven (or whatever) could sell out, forcing you to buy another at a different store and for more money.

Ditch your ego

Don’t let the response you get to a gift define your self worth. So what if you bought the wrong size, color, make or model? Assuming you didn’t buy the gift at a flea market or ate the receipt, the odds are that the gift can be returned. Don’t have hard feelings if you didn’t just nail it. The gift you bought can always be exchanged and happiness assured.

Ask for a suggestion or two

Finally, if you want your gift to be a real hit don’t be afraid to ask for a suggestion or two. Your gift doesn’t have to be a big surprise in order for it to be a great one.

If you can’t think of a good gift, give a bad onecredit cards

Sometimes it’s just impossible to think of a good gift. Your friends and family may be scattered across the country so there’s just no way for you to know their habits, hobbies or needs. As an example of this my wife’s sister who lives three states away, almost always sends gifts that leave us laughing. But then how could she know what would please us when sees us in our home for a few days every five years or so?

 

If you can’t think of a good gift, you could give a bad gift – a gift card.

So why are gift cards bad gifts?

It’s because according to some psychologists a gift card is a symbol of a lack of intimacy. They are thought of as a lazy person’s gift as they are not gifts so much as they are “placeholders” for gifts. What they say to the people who receive them is I am not going to think about what you are or what would make you happy. I’m going to leave the shopping to you. Plus, if you believe it’s the thought that counts, a gift card is only about how much it cost because that’s all there is to it.

If you are stumped and can’t think of a single gift to give outside of a gift card, there are things you could do to make it more personal. For example, you could send that son and daughter-in-law that lives 1,000 miles away a bunch of restaurant gift cards along with the cash to hire baby sitters. Failing that you could at least choose gift cards you believe would match the recipient’s interests. If you think the they like movies, you could send a gift card for AMC or Regal Cinemas. Is he a hunter? How about a Cabella’s gift card? If she’s an athlete, you could choose gift cards from Dick’s or Sports Authority.

What to do about holiday foodholiday turkey

Will you be bringing food to an office party or family gathering? And will it be “indulgent” food, that is food that’s just loaded with sugar, carbs and calories? You might want to rethink this. The holidays are just not a great time to foist indulgent foods on people we care about. While we might think that they will enjoy the cookies, cakes, pies and drinks we bring to the table, don’t assume they will feel this way.

Your family members, friends and coworkers might be thinking about their health and weight. So it could be worthwhile to reconsider what you want to feed them this year. There was one study done recently that revealed women feel the happiest after eating an unusually healthy meal. On the other hand, indulgent meals had the opposite effect. They increased stress and negative emotions. So, consider bringing something to the office or family get-together that’s not so indulgent. It may be a relief for many people to see something healthy on the table to balance all those sweets and that heavy holiday fare.

5 Ways That Budgeting Can Limit Your Financial Growth

budget and scissorsAiming for financial growth is a common goal for all of us. Who dislikes wealth and success? Nobody. We all like to experience having a lot of money but unfortunately, we live in a society that encourages us to spend beyond our means. That’s consumerism for you.

When the nationwide financial crisis struck most of the American households, everyone looked unto budgeting to help them organize their out of control financial lives. This is one of the tips given by successful people about personal finance. You need to take control back and that requires you to create a budget plan. This will help you identify your income and the expenses that it pays off.

5 reasons your budget plan will not take your finances to the next level

But while budgeting is very helpful, your efforts should not end there. Some people make the mistake of focusing too much on their budget plan and when it fails to deliver, they end up feeling discouraged. A budget is the first step towards financial independence – it is not the only step. If you make it your only step, there are 5 reasons that it will not give you the financial growth that you are expecting.

  • Budgeting can be tedious. To tell you frankly, creating and monitoring a budget can get tedious. If you have to work hard on something, you want it produce results right? The sentiment is understandable. However, for the amount of time and effort that you will put in your budget, counting the monetary returns will not give you a satisfying result. It will point you to what you need to do but not how you should accomplish it. So focusing on your budget plan will fall short of what you expect. All of this will only end up frustrating you and discourage you from continuing with the budget.

  • Budgeting requires you to sacrifice a lot. This actually depends on how far you have fallen in terms of your financial crisis. But usually, your budget will show you the various sacrifices that you have to make in order to reach your goal. It can be expenses that you can no longer afford or entertainment expenses that are not allowed to be spent on. The reality that you will face in your budget can be discouraging – unless you see the fruits of your sacrifices. This, again, is not attainable by your mere budget plan.

  • Budgeting are wrongly thought to be consistent. This is actually a popular misconception about your budget plan. You need to think about your budget as a flexible plan. In case your money grows or decreases, you need to revise your budget to allow you to maximize the changes happening to your finances. While this is true, you have to be careful about being too quick to upgrade your lifestyle to suit the increase that you experience. When your money decreases, you need to change your budget immediately to make sure your expenses will not go beyond your new income. But when it increases, what you need to change is not your expenses – but your savings.

  • Budgeting primarily changes your behavior. When you want financial growth, you need more than a budget because it only modifies your behavior. As mentioned, it will not teach you how you will do something. It will just tell you where your money should go to. It will not teach you how to improve your cash flow – that is the main fault of your budget efforts.

  • Budgeting can give you a false sense of complacency. As you continue to use and implement your budget, you will realize that as soon as you are able to put your expenses within your income capabilities, you get complacent. But the thing is, that is not success. It leaves you stagnant. Your budget focuses more on keeping your spending beneath your earnings. It does not teach you to earn more. That is where it falls short and that is the reason why it is not a fitting tool for financial growth.

Do not get locked in your budget

The whole essence of this article is this: do not get locked in your budget that you lose sight of the other tools that you can use to get yourself out of a financial crisis and into growth. There are other important things that you need to learn to grow your money. While budgeting is integral as your first step, you need to take more than that to succeed.

You need to learn how to save, spend your money wisely and you need to learn how to invest. The last part is key to the financial growth that you wish to achieve. Both saving and investing are actually proactive ways to help you grow your money.

We encourage you to learn more about what you can do to grow your finances by educating yourself. There are other resource websites like this one that you can utilize to learn about personal finance. In fact, we found the ebizmba.com has a list of the personal finance websites that we can recommend for you. In the end, your knowledge will be the catalyst for the improvement of your financial well-being.

3 Important Rules To Maintain Debt Freedom

man behind dollar signBecoming debt free is a great experience. You must have gone through a lot to reach this stage in your life. Looking back, you think about the sacrifices that you had to make and the various temptations that you had to overcome. But while you have gone through highs and lows just to become debt free, you need to know that your journey is far from over.

You know how people has to continue dieting and exercising to keep their ideal weight? The same is true to maintain debt freedom. It will not be as tough as losing weight but there is still effort to be exerted.

3 habits that will keep debt problems away

You must understand that staying debt free will entail some work. There is a conscious effort to correct the mistakes that you made in the past. Obviously, your old life is no longer something that you can follow. There are changes that you have to make in order to ensure that you will keep your debt freedom.

There may be any changes but there are 3 important personal finance rules that you need to follow to keep your new found financial freedom. These three are vital because they result in several other habits that will all contribute to making you a smarter manager of your personal finances.

Budgeting

First is budgeting. You want to make sure that you will live within or below your means and the best tool for this is a budget plan. This habit basically encourages you to consult your budget at all times. You have to know when a purchase is to be made or when it shouldn’t. This plan will identify your income and the various expenses that it finances. If you always consult your budget plan, you will never be in danger of overspending. That means you will not have to resort to credit for the important expenses that you have to make. In case you are unsure of how you can do this, you can always go to BudgetWorksheets.org to find the right template that you can follow. You can start with this and slowly revise your budget as you see fit. Take note that this is not something that you do only once. Your plan should continue to change as time goes by.

Smart spending

The next important rule to maintain debt freedom is smart spending. This can be easily done if you have a budget plan. You simply have to stick to your budget and decide which expenses must be prioritized. But beyond that, it is important for you to remember that smart spending is not just about saying no when you cannot afford a purchase. The real test is saying no when you can afford to buy something. Being smart is prioritizing savings before you purchase unnecessary expenses that you can live without.

Saving

Speaking of saving, that caps off the three rules that you have to follow while living a debt free life. It may surprise you but there are actually consumers who never spent more than their income but ended up in debt when an emergency struck. They were not prepared for the unexpected expenses and that pushed them to borrow money to help tide over that immediate cost. If you have your emergency fund, you can avoid this possibility. Another reason to save is for your financial goals. You want to retire in comfort and that means you have to save up for it. If you want to buy a home and you don’t want your mortgage payments to end up ruling your future finances, save up for a portion of home buying price.

All these three will help you reach the personal goals that you have for yourself and your family (or future family). Now that you have reached this stage in your life, it pays to take the effort to make sure you will experience it for a very long time.

Being debt free does not necessarily mean zero debt

There is a popular misconception about debt freedom that you also need to revise. Being debt free does not necessarily mean you will be completely out of debt. When you do not have any debt, you will keep your credit history thin. That will not bode well for your credit score. When the time comes for you to borrow money for your mortgage, you might be given a high interest simply because you have a low score on your credit rating.

Some people are quick to implement credit card debt elimination and while this is helpful, it does not solve the problem. What we suggest that you do is this: eliminate debt but not the credit card. You can continue using your card while keeping yourself free from debt. You just have to make sure that purchases made with your card are budgeted so you can pay for it immediately. Not only that, you want to make sure that you understand the features of your card. That means familiarizing yourself when it comes to finance charges, interest rates and grace periods. Knowing what these are all about will help you make better spending choices when it comes to your credit cards.

Going beyond credit card debt, you also have to identify the type of debts that are actually good for you. These are the debts that will help put money in your pocket like home loans, business loans and student loans. These all contribute to your personal wealth.

7 Things You Could Do Right Now To Fight Debt

Erasing DebtDo you feel as if debt had you backed into a corner of the ring and was punching you unmercifully? Big debt can be an unrelenting opponent. The minute you feel you’ve escaped its grasp, there it is back again in the form of yet another late payment notice along with a big fee. But you really don’t have to take it anymore. You can fight back and actually knock out those debts. It may take some time but the sooner you get started the better. And as the old saying goes, there’s no time like the present. Here are seven things you could do today to begin overcoming those debts.

Cut up all your credit cards but one

Stop reading this article, go to your billfold, pull out all of your credit cards, get a pair of scissors and cut up all of them but one. The reason you’re having a problem with debt is probably because of the way you use credit cards. This means the best first step is to get rid of them. It’s acceptable to keep one but you should do as one woman did and that’s put it in a small plastic container and stick the container into your freezer. That way you would have the card to use in the event of an emergency but it would be tough enough to access that you wouldn’t be tempted to use it for some impulse purchase. A credit card can be a useful tool if you use it sensibly – which means never charging anything unless you know you can pay it off at the end of the month. Conversely, if you’re making multiple charges that you can’t pay off within 30 days and are carrying balances forward, you’re not only creating debt, you’re piling up interest charges that could keep you in debt practically forever.

Open a savings account

If you don’t have a savings account you have no way to protect yourself against emergencies such as an automobile accident or serious illness. As the old saying goes, stuff happens. And it’s inevitable that you will have an emergency sometime in the next couple of years. If you have a savings account as an emergency fund, you could pull the money out of it to cover that unexpected expenditure. If not, your only alternative would be to borrow money to pay for the emergency, which means just taking on more debt.

Get a debit card

Maybe you can’t actually do this today because your bank or credit union may be closed. But if you can’t do it today, do it the first business day. The card should be tied to your savings account so that you can’t spend any more than is in that account. A debit card works much like a credit card and can be used almost any place that accepts Visa or MasterCard. A debit card provides an easy way to track your spending. You should also be able to go online and check your balance at least daily so you will know exactly how much money you have to work with until your next payday.

Download a budget tracking app or buy  a notepad

If you have a smart phone, there are numerous expense tracking apps available for iPhones, Windows phones and Android phones. The minute you finish reading this article, go online and download one. Most of them are free. The ones we like include Mint.com and Expensify. Mint will not only help you track your spending but has numerous other features that could assist you in your fight with that old devil debt. For instance, you could type in the numbers of your bank accounts, investments, credit cards, and any personal loans. The program will then display all your important financial information together as one big picture.

Expense tracking will be a bit more difficult if you don’t have a smart phone but there is still an answer. Get a pen and notepad. Whether you use a notepad or smartphone app the important thing is to make sure you start tracking all of your spending, right down to that donut you buy on the way to work.

Write down some goals

What is it you would like to achieve in life? Would you like to buy a house? Go on a really great vacation? Get a new car? You need to sit down and spend some time thinking about what’s important to you or what are your goals. Then write them down and post them someplace where you would see them every day. This accomplishes two things. First, it will make it easier for you to stay on the budget you’re about to create and second, this will help keep you motivated as you see you’re making progress towards achieving your goals.

Make a budget

You won’t be able to make a true budget until you track your spending for at least 30 days. But today, you can get out your check book and any receipts or credit card statements you have and add up your spending the best you can. Make sure you also include your fixed monthly expenses such as rent, debt payments, and auto loan (if applicable) and so forth. Next, add up your monthly earnings and compare the two. The odds are you’ll discover that you’re spending much more than you earn.

Decide where you can make cuts

get out of debtThe only way you can start to get debt under control is to reduce your spending until it’s less than your income. In fact, it should be at least 10% less than your income. How can you do this? You need to go back to the list you made of your spending and try to make cuts everywhere you can. You might start with your “variable” expenses such as food, entertainment and clothing. These are categories where most people find they can make cuts. You also need to review your “fixed” expenses such as rent and that auto loan. Start with the idea that nothing is sacrosanct – that you should be able to make cuts in almost every category.

That’s it for today

If you’ve followed our suggestions and have done the seven things we recommend you do today, you’re off to a very good start in defeating your debt. Tomorrow, you will need to use that smart phone app or notepad to begin tracking your spending so that you can create a real budget. As we noted before, you will need to track your spending for at least 30 days then sit down and organize it into categories. This will give you a true picture of your spending and of those areas where you might be able to make even more cuts. The money you save should be divided between your savings account and paying down your debts. One of the best ways we encounter for paying down debt – especially credit card debt – is called the snowball method. Follow it, and you could be completely out of debt in two years or even less. The following video explains some other ways to get out of credit card debt you might find helpful.