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How To Give Your Finances A Good Scrubbing

Couple Using Laptop And Discussing Household Bills Sitting On Sofa At HomeFall is upon us for at least most of the country. Of course, if you live somewhere such as Southern California or Florida then fall is only a concept or a memory. But regardless, the holidays will soon be here so that now would be a good time to give your finances a good going over. What do you need to do? Here are tips for giving your finances a good scrubbing to make sure you’re in tiptop financial shape for Thanksgiving and Christmas.

1. Prioritize your budget

First, review your budget. If you had a hard time prioritizing things, you need to review your expenses and determine which ones are fixed and non-negotiable such as rent or mortgage payments, auto loan payments and utilities. You might also add other things such as groceries and gas into this category. Add up all these expenses and subtract them from your monthly income. What you have left is what will be available for your discretionary spending such as entertainment, shopping, dining out and travel.

Next, make sure you budgeted for an emergency fund. You just never know when your car might break down, your dishwasher stops working or someone in your family suffers a major illness. You need to be prepared for these unexpected items by having an emergency fund. Most experts say that your fund should be the equivalent of six months of living expenses. If this seems too daunting try saving for at least three months worth.

Review your housing costs, as it’s possible that you might be living beyond your means. In this case, consider getting a roommate to reduce your living experiences. You can also cut expenses by carefully furnishing and maintaining your home. Buy used furniture and appliances instead of new ones. Then take the time to refurbish them yourself. You could probably solve many household maintenance issues yourself and eliminate the need to hire an expensive contractor.

Review your spending for the past few months. Did you find some problem areas? Or maybe there are areas where you budgeted more than you really needed. Adjust things accordingly. And while you’re at it, check to see how well you’ve been sticking to your budget. If you find you’ve been spending too much time tweaking it throughout the month, simplify things by creating fewer, broader categories. You’ll still be keeping your spending under control but your budget won’t take up so much of your time.

Be reasonable. Don’t try to keep a budget that is simply not doable. You need to be realistic about your budgeting just as you would with an exercise plan. If you’ve always had a problem sticking to a savings plan or are a compulsive spender, don’t expect that you will change overnight. Begin by setting some small goals so you can build the confidence to tackle bigger issues down the road. Keep in mind that budgeting is not a sprint. It’s a marathon. And above and beyond everything, understand that this doesn’t have to be about deprivation. If you follow these tips you should be able to easily have a budget you can live with and that will help you achieve financial peace of mind and without a great deal of self-sacrifice.

2. Wipe out old accounts

If you’re typical you have old unused bank accounts and dusty old checks or bank statements just sitting around somewhere. If so, now would be an excellent time to rid yourself of those checks and bank statements and close any accounts you’re not really using. If you’ve been unhappy with your bank for some reason, this would be a good time to switch. While you’re checking out those accounts, make sure to review your retirement accounts. You might find a 401(k) from a previous employer you had just forgotten about. If so, consider rolling it into your current 401(k) account so that you have only the one to deal with and can streamline your retirement savings.

3. Review your W-4

It might feel great to get a big tax return but if you got one earlier this year what you’re also doing is giving your Uncle Sam an interest free loan out of your paychecks. Get out your W-4 and take a close look at how much money you’re having withheld. You might be better off changing your withholding so that you would have more money every month instead of giving Uncle Sam that free loan. In fact, as revealed in this short video, your goal should be to end up paying  no taxes and getting no refund.

 

4. Let go of all that paper

Whether it’s your utility bill, checking account or a student loan account, almost all of them have paperless billing options. You can cut back on those stacks of paper spilling all over your desk by choosing to get these bills electronically. This works especially well if you’re paying your bills online anyway. So, choose paperless billing wherever possible. Those piles of clutter on your desk or kitchen counter – and the environment – will all thank you.

5. Do some comparison shopping

How long has it been since you comparison shopped to see if you could get a better deal on your cable, car insurance, cell phone plan or any other monthly items? If it’s been awhile, now would be a good time to do this. It’s best to shop for better rates at least annually but even better to do it semi-annually. This will help ensure that you’re not paying too much for those services.

6. Review your insurance coverage

Has it been like forever since you reviewed your life insurance or homeowners policies? If this is the case, take some time to give them a check up. Review all of your policies to make sure that you have an adequate amount of coverage. For example, if you’ve recently had a baby or got a big raise you might want to upgrade your life insurance. The cost of building houses has risen fairly dramatically over the past five years so you might want to increase your homeowner’s insurance policy to make sure you could rebuild your house in case you suffered a total loss.

7. Make an inventory

If you have either renters or homeowner insurance you need to have an inventory of all your possessions. Then if you suffer a disaster, it will be much easier for you to replace everything. If you don’t already have a home inventory, take time to make one. The simplest thing is to take photos of your stuff, especially those big-ticket items such as your big screen HDTV and furniture. Then write down approximately what you paid for each item and be sure to start saving receipts for any new items you bring into your home.

8. Sort out your paperwork

You’ve probably managed to accumulate a whole bunch of documents that you don’t really need any more. Go through everything, find the documents you don’t really require any more and shred them. As an example of this, the federal government says that you really only need to keep your bank statements for a year. You can also get rid of your tax documents and their supporting records after seven years. So if you’re like us and have bank statements dating back to 2009, just get rid of them.

In summary

Doing all of these things might seem like a terrible chore but in fact they will probably only take you only about a day total. And just think how much simpler your life will be when you complete them. You’ll have gotten rid of all those stacks of paper that have been taking up space on your desk, you’ll be spending less on reoccurring items such as cable or your phone bill, you’ll be creating an emergency fund and will have better insurance coverage. Wouldn’t this be worth investing a Saturday?

7 Ways You Can Make Budgeting Fun

woman carrying groceriesThere are several good reasons why you use a budget in your household finances. Budgeting is the first step towards financial independence. Not only that it can help you strategize how you can reach all of your financial goals.

Best of all, a budget can help you avoid debt. An article from USNews.com revealed that the unexpected costs are not really unexpected. We know that they will happen. The problem is, we do not budget for them. We sometimes fail to prepare for expenses like birthdays, weddings, and even car repairs just because did not put them in our budget plans. If you think about it, these are expenses that know will happen. Weddings are once in a lifetime events that couples will reveal months before the actual date. Birthdays happen every year. Car repairs – each car part has a specific lifespan that you should be aware of. These are all expenses that you should be prepared for because you know that they will happen. Even the real emergencies like accidents and illnesses can be prepared for in advance. You just need budgeting to prepare for all of them.

The truth is, we all know how important having a budget is. However, not everyone is successful at it. The reason for that is a wrong perception and implementation of a budget plan. Some people find a budget plan to be restrictive and complicated. But an effective budget is actually not complicated nor is it restrictive. In fact, a budgeting can be fun if you know how to implement it correctly.

How can you make budget implementation fun

Some people start organizing their finances but end up giving up on it because they are having trouble sticking to a budget. If you want some motivation to make a budget plan a regular part of your life, you may want to follow these 7 suggestions to make budgeting fun and in effect, easier.

  • Use a budgeting application. There are so many budget apps that are available in the market. You can start your search by going to review sites or news websites like NYTimes.com for a list of the best apps that you can use. These apps can help you organize your finances easily. It can also help you automate the tracking of your finances. The app can make budgeting less tedious and that should encourage you to continue using it so you can monitor where your money is going.
  • Anticipate your goals. All budgets should be aligned to your financial goals. Your goals can be to pay off your debt, grow your savings or put aside money for investments. These are all great financial goals that a budget plan can help you achieve. To make your budget more fun, you might want to keep your eyes focused on your prize. If you have to create a visual representation of your goal, then do that. Put it in your ref or your workstation. If your goal is buying your dream house, print a small photo of that and tape it to your credit card. That should make you think twice before you use your card for unnecessary purchases. Your goal should keep you motivated to stick to your budget plan.
  • Set up milestones. If you have long term goals, it helps to set up milestones so you can be encouraged to implement your budget to reach them. These milestones will help you concentrate and take note of the progress that you are making. Every time you reach a milestone, you will find the motivation to reach the next milestone. Having these little goals will give you something to look forward to as you deal with the sacrifices involved in changing your financial habits for the better.
  • Give yourself small rewards. If the milestones are not enough to motivate you, give yourself small rewards after reaching a milestone. Or, you can reward yourself if you stick to your budget every month. For instance, if you succeeded in paying all your bills on time, allow yourself to give in to small indulges – as long as it is still within your budget.
  • Make budgeting a group activity. Involving other people in your attempt at budgeting will help make it more fun. Let your friends in on your budget plan efforts and encourage them to do the same. Compare notes and you can even turn it into a game. You can also include your family – especially when it comes to saving. Let your kids compete at who will have the most savings each week. These should make the sacrifices needed in implementing a budget more acceptable.
  • Join a community. If you cannot find friends who will be with you in your budgeting efforts, you can find companions online. Find an online community and share your experience with them. You might find some advice on how to stick to your budget plan. It helps to know that you are not alone in your struggle. And talking to real people who have successfully passed the difficulties that you are going through should make things easier for you and will keep you from feeling discouraged.
  • Learn something new. If your budget plan requires you to lower your spending, you might want to learn something new so you can meet that budget goal. For instance, learn how to bake so you can lower your food costs. You can also learn how to make your own household products to save on groceries. Not only will you be successful in sticking to your budget, you can also improve your skills.

A budget plan will help you spend on the important things in your life

One of the benefits of a budget plan is it will allow you to spend on the things that are important in your life. Contrary to what others perceive about budgeting, it will not restrict or deprive you of what you want to spend on. The goal of a budget is to help you find the means to pay for what you love to indulge on without putting you in debt.

According to Gallup.com, less than half of consumers spend more this year compared to the last. Only 18% said that they are spending less. When these expenses are detailed, it is revealed that the increase in spending is mostly on household necessities like groceries, utilities and gas. This could mean that consumers are wising up when it comes to spending – which is a good thing. But that also means that a budget plan should still be implemented because of the following reasons:

  • It can help you organize your money. One of the benefits of budgeting is in helping you organize your finances. You can identify how much money you are earning each month and where each penny will go. You can control that and make sure that it only goes where you want it to.
  • It can help you make financial decisions. Having an idea of your overall financial situation is one of the best benefits to a budget plan. If you are tempted to buy something, you can simply consult your budget to see if you can afford it or not. If not, then you can choose the expenses that you can cut back on to afford it. If there is none, then you know that the answer to your expense is a no.
  • It can help you grow your savings. A budget plan will give you more chances of meeting your saving goals. You can decide to put aside $500 a month and identify the expenses that you will cut back on to meet that goal. Without a budget plan, you might save only what is left after your expenses are met – which is usually one of the best ways to fail at saving. You have to admit that saving last usually ends up with you having nothing left to save.

It can help you stay out of debt. Since budgeting helps you save, it is one of the best ways for you to stay out of debt. That is because any unexpected expense will not have to be borrowed. You have your savings for that. Not only that, any expense that you will make on your credit card can be included in your budget. That way, you can pay it off at the end of the month and you know your monthly credit limit.

3 Expenses You Should Never Sacrifice In Your Household Budget

frustrated woman with a paper and calculatorIf you believe that budgeting is one way to get out of debt, then you should understand the importance of creating a household budget. A lot of Americans are dealing with debt – some of them are managing credit wisely while others are failing at it.

After the Great Recession, we have come to realize just how important it is to have a budget plan. It can help you control your expenses so you can put aside more money to pay off your debts. The extra money can even be sent towards your savings. It can also help you avoid a lot of financial dilemmas in the future. It can help you understand why you are in a particular financial situation and how you can get out of it.

Why do we need to cut back on our budget

Taking a look at how Americans spend their money is a great way to help us understand our financial habits. According to TheAtlantic.com, the majority of the household budget is spent on food. Now, the majority of our budgets go to housing costs. Among the things that grew in percentage in our budgets include healthcare and entertainment expenses. These details will all be evident in your budget and it is important for you to analyze them so you can determine the changes that you need to make in order to improve your financial situation.

In most cases, people who are forced to use a budget plan are those who have a need to cut back on expenses. The main reason for that is debt. We had to cut back on a lot of things because we need to increase the amount allotted for our debt payments.

In an article entry on ReadyForZero.com, they mentioned a statistic from Experian that revealed the average monthly debt payment of consumers. In 2010, the monthly debt payments of Americans range between $763 to $1,285. If the average household earns between $4,000 to $4,500, their debts take up 20% or so of their income. They only have 80% left to live on. With utilities, food, transportation and other expenses, how can the average American household survive?

This is why a lot of us create our household budget for the purpose of cutting back on expenses.

3 expenses that you should not compromise in your budget plan

But while there are so many things in our usual spending list that we can trim down, there are those that you need to exert caution when trying to cut back on them. There are certain entries in our budget plan that we should never sacrifice.

Healthy meals

The first is healthy and nutritious food. Even if the processed food is cheaper, it is not worth it to risk the health of your family just so you can save a couple of dollars. You still need a well balanced diet and that is something that you should never compromise. If you want to trim your food expenses, you may want to cut back on eating out. These cost a lot more than what you will spend if you cook your meals at home. And when you are out shopping for food, make a list of what you need. That way, you can forecast in your household budget the amount of money that you will need to ensure that your family will eat healthy food always. Here is a video from HowCast about how you can feed your family healthy food even when you are on a tight budget.

Doctor prescriptions

When the doctor prescribes you medicine or treatments that you need to get better, you should not skip on this just so you can trim your household budget. If you have to save, go and ask your doctor to prescribe generic medicines. But do not skip a dosage or take a lower one just so you can save. Get the savings you need elsewhere and not your medications. Your health is a top priority. If you do not take care of it now, it might get worse and cost you more money in the process. One of the best ways to deal with big medical bills is to avoid them by taking care of your body.

Personal hygiene

There are so many things that this can cover. For instance, buying a very cheap make up just so you can save on money and end up getting an allergic reaction is not really the wisest of moves. Proper hygiene is something that you need to be careful with. Try to get deals for toilet papers, and similar products but do not buy nameless brands without making sure if it is safe for you. In the end, it might cost you a healthy body if you sacrifice proper hygiene for the same of making budget cuts.

How to fix your budget plan if it is not working

If you are already implementing a household budget and you realize that things are still not improving, you may need to reconsider your budget plan. Here are 5 steps that you can follow to help fix it.

  1. Track your spending. In most cases, when your household budget is not working, it only means there is something wrong with your expenses. Of course, it always pays to take a look at your income too. Maybe you based your budget expenses on the wrong income. But even if this is the case, you still have to take a look at your expenses. Forbes.com and other authority sites have listed some budget software programs that you can use to track your spending.
  2. Compare your spending with your existing household budget. Once you have tracked your spending, compare it with your budget and see where you are spending a lot of money on. This will help you see where you should cut back on or where you should adjust the amount in your budget.
  3. Analyze why you are overspending. If there is a particular category that you are guilty of overspending, you need to ask yourself why that is so. Is it because you do not have self control? Or is it because you simply made unrealistic cuts in your budget?
  4. Do something to stop overspending. When you have identified the reason why you are overspending on a particular category, you need to correct that or cut back on something else to meet your budget limit. If you are overspending on food because you keep on eating out, then you need to cut back on that and opt for home cooked meals instead. Revise your household budget according to your plans to stop spending beyond what your budget dictates.
  5. Commit to the new plan and observe. Be disciplined in following your new plan and see if it works for you now. If not, then you need to go back to step one and analyze your budget plan once more.

Making your household budget work will involve a lot of changes in your habits. You have to look deep into your financial habits so you can determine if that is what is causing you to fail in your finances. Sometimes, it is not really the debt that is the problem. It is our own behavior when it comes to our money. We need to learn how to change our behavior and that is the only way that we can implement a budget that is effective in improving our financial situation.

8 Signs That You Need To Implement Financial Management

checklistFinancial management is a critical part of growing up. It dictates how well you are able to handle income and dispense the same for payments on your expenses and other loans. It restricts your purchases and tells you what is important and what can wait. It tells you as well what you can do to increase your income to meet financial targets. Financial management can also be a potent tool against debt.

This is important to share when there are about 20 million college students on an average at any given year according to Asa.org. That is a lot of college seniors entering the workforce where they will be earning on their own and experiencing life in full blast. The walls of their colleges and universities has now grown bigger to accommodate a lot more responsibilities. On top of these is developing financial management in running their money.

It starts with a desire to get their finances in order. There are still  a good number of Americans who are not able to balance a checkbook. The 410 (k) retirement fund, investments and emergency funds are alien to them. These are some of the foundations of financial management and college graduates and even some seasoned professionals needs to understand this to survive financially.

8 signs that you should start working on money management skills

As you go through life, there are pit stops where you need to make decisions and add some financial tools in your arsenal. Some of these can start as early as when you get your first job and for others, it could be as late as a few years before retirement. Whenever it happens, you should be able to discern these signs and know that it is time to work on your financial management skills.

When you start earning your own money

As soon as you leave university, the first order of business is not a vacation with your friends or a cruise with your partner. It should be to look for a job because your expenses and loan payments will not wait for your to finish a good time. If you have student loans, six months is a short time for a grace period and you need to start making payments after. Getting a place to stay, applying for utilities and others will require you to have a steady income.

When you get a job, income will not be too far behind. And when you start earning your own money, it is a clear sign that you need to implement proper financial management. This will put order in your finances and ensure that your monthly salary will not only last you until the next paycheck but will actually provide financial security for you in the long run.

When you already have a bank account

Forbes.com shared that there are about 7.7% of American households who still do not have their own bank account. That is approximately 1 in every 13 American families. There are mixed sentiments on how the banking system helps consumers but it cannot be denied that it is one of the safer ways to keep money and allow it to grow. When you open your own bank account, it is another step up  that needs proper management of your finances.

When you are saving for a goal (e.g. retirement, etc)

Having financial targets is another clear sign that it is high time for financial management skills. These can be in the form of emergency funds or retirement funds. In fact, there is only about 18% of Americans who are confident that they have enough funds for retirement according to Statisticbrain.com. Having financial goals is also a clear sign of financial maturity as you are already planning ahead and not just for the moment.

Here is a video explaining how saving for retirement might need to be done until 68 years old:

When you are responsible for paying monthly bills

Being able to pay for utilities such as water, electricity, phone, internet, and cable is another benchmark on the need to implement financial management. You need to be able to juggle your income with your expenses to avoid coming out short at the end of the month.

When you have started taking on credit

Taking on credit is another sign of financial maturity. Adding expenses on your card or taking out a payday loan to fix some part of the house needs proper management of finances. Without it, you might just end up in a store sale using up the loan you took out for another unnecessary expense.

When you start monitoring your credit

Monitoring your credit comes from the need to understand where you are putting your hard earned money. What items are you buying and where you can cut down on expenses. Financial management will help immensely at this point because it can provide a clear direction on how you can proceed after monitoring your credit.

When you  have started investing

Investment is a by-product of forward thinking and once you start delving into the world of investments, you will need financial management to guide you through your options. In fact, investing is one key to financial independence. It can help you plan for your future and hopefully retire at the time when you want to, not when you need to.

When you start paying your taxes

Making tax payments is a sign that you are already earning your own money. This calls for the need for financial management not only to monitor your income but to check as well if you are remitting the right amount for your taxes. Tax refund is a great surprise at the end of the year but it actually stems from wrong tax calculation. That would have been money you could have used for investment at the early part of the year. Instead of just giving the government an interest-free money, it could have earned a few dollars somewhere else.

4 important concepts of financial management

Financial management has four key pillars that consumers need to understand. It is beneficial to know these points in order to practice proper management of your finances.

  • Budgeting. Income has to be treated as the output of your hard work. You should put importance on how you use it and this is where budgeting comes in. Understand the important expenses and forego those that you can live without.
  • Saving. At this day and age, not a lot of people has an excuse not to save. Even technology has made saving easier. This is an important aspect of financial management because it allows the consumer to have funds for future use.
  • Smart spending. Similar to budgeting, spending smartly allows you to weed out your needs from your wants. It helps you identify and prioritize the important spending items in your budget.
  • Credit monitoring. It is important to be on top of your finances and monitoring your usage of credit can give you a great overview of your habits. Where you spend too much and where you can make improvements are just some of the advantages of checking your credit spending.

Financial management is an important tool in putting sense in your finances. Some people say that it is not how much you earn but how well you use what you have. This is where proper management of your finance kicks in. As long as you see the signs along the way, financial management can guide and steer you in the right direction.

4 Benefits Of Budgeting That Goes Beyond Your Income And Expenses

budget on top of moneyIf you really understand budgeting, you will never need an explanation why you have to implement it in your life. Nobody took the time to budget their money and follow it strictly yet still ended up in a financial crisis. No foolproof budget plan will ever lead to your financial demise. If you really want to improve your finances situation, one of the things that you cannot live without is a budget.

Sadly, it seems like Americans are slipping back to our old ways. The effects of the Great Recession included a more cautious American spender that used a budget to keep themselves from overspending. That time seems to have passed.

According to the latest survey from the NFCC.org, majority of the respondents (3 out of 5), revealed that they are not budgeting and keeping track of where they are spending their money. This is one of the habits that got most of us in debt and in a lot of trouble in the mid 2007 to 2008. Those who claim that they are spending less is also declining – which indicates that consumers are increasing their purchases. While this may seem good for an economy that is 70% reliant on consumer spending, that does not really bode well for the average American household.

We are not saying that you should stop spending. We are in a consumerist society. Not spending will be very difficult to do even if that is what you really want to happen. What we really want you to do is to keep on spending but before you do that, you have to seriously implement budgeting in your life. That way, you can easily monitor where your money is really going.

4 ways your budget plan can help your finances

If you need some motivation to get started on your budget plan, you may want to focus on the benefits. There are many positive results to budgeting and it goes beyond just telling you what your income and expenses are. To get you excited, here are 4 ways that a budget plan can help improve your financial management efforts and ultimately, increase your personal net worth.

You can take care of your future self.

Although it might seem far off, you have to believe that every decision that you make today will dictate the life that you will live when you retire. If you have the habit of splurging your income in your youth, your older self will feel the effects of that. A credit card debt that accumulated since your 20s or 30s can haunt you for the next few decades – especially if you decided to pay only the minimum of what you owe. Based on a study done by the Employee Benefit Research Institute and published on EBRI.org, the retirement confidence in 2014 is slightly better compared to 2009 to 2013. But although that is true, there is still 24% of workers who are not confident about their finances when they retire. The study revealed that those who felt confident with retirement are usually those who had a plan in place. If this is your sentiment, then you should realize that budgeting will help you organize your income so you can ensure that your retirement contributions will always be met.

You can plan your spending splurges.

Some people have the wrong idea about budgeting. They think that when they plan their expenses, it will put them in a very restrictive and depriving way of living. This is not true. If you know how a budget works and you can implement it correctly, you will realize that you can splurge on the things that you want and not feel guilty even if it is unnecessary. That is because your budget plan will help you identify the priority expenses and shift other purchases so you can make smart splurges every now and then. That way, buying new clothes or that new camera will give you genuine pleasure because you know that your budget is allowing that purchase.

You can spot spending leaks.

Another benefit of budgeting is it will tell you where you are spending your money in places that you really should not. By seeing these leaks, you can move to seal that off or at least, schedule it so your other priority expenses will not be compromised. A budget plan is usually on a monthly basis. Those $1 or $5 purchases may not seem like much but if you total them, it will show you how it is eating up your finances and compromising your true spending capabilities. Once you have seen the leaks, it will be easier to make the sacrifices that will lead you to stop wasting money on them – like brown bagging your lunch or carpooling.

You can be one step closer to meeting your goals.

Any financial goal, big or small, requires a plan to achieve them. That is how you ensure that you will succeed in achieving the goal. If you want to make managing financial goals easier, that can be accomplished by a clear and foolproof budget plan. Of course, it has to be partnered by implementation but the planning by itself puts you one step forward in reaching your goals. A budget allows you to put aside the necessary contributions needed to make your goals into a reality. It will also help you determine your progress so you can gauge if you need to kick your saving efforts up a notch.

Common pitfalls your budget can save you from

As you are implementing your budgeting efforts, you also have to be aware of the pitfalls that can be averted by following a budget plan. There are three important financial mishaps that it can save you from.

  • Being late on payments. You will never be late again you input all of your debt payments into your budget plan. You do not have to worry about not having the money to pay off a financial obligation because your budget will make sure that you have put aside the contribution for that. But again implementation is the key to never be late on your due dates.
  • Foregoing saving because of too much expenses. NerdWallet.com revealed that one of the habits that helped selfmade millionaires is their ability to save. You may think that this has no room in your finances because of too much expenses. If you list everything down in a budget plan, you can identify the details that you can remove so you can make way for your savings.
  • Wrong assumption of your financial capabilities. This happens to most of us. We think that we can afford something when in truth, we cannot because there is a more important place for your money other than an impulse buy. Your budget will easily give you an idea about what you can afford to spend and what you cannot. Consult your budget at all times so you can stop overspending once and for all.

Budgeting can really work wonders in your financial life but, as mentioned several times, you have to be disciplined in following it. In case you feel like you budget is very difficult to implement, you might have created an unrealistic one. Do not be afraid to revise it if you have to. In fact, you need to keep on revising this budget plan so you can ensure that it is still aligned with your current financial priorities.

5 Important Tips For The Recently Graduated

woman holding a credit cardCongratulations! You’ve done it. You toughed your way through those four or five years of early morning classes, brain-numbing seminars and midnight study sessions and you’ve graduated. You have your diploma firmly in hand and are all set to move on to the next stage of your life. You may be looking forward to getting a new car, starting a job or even getting married. You’re about to be on your own, maybe for the first time in your life and you suddenly realize your personal finances are all up to you. You’ll definitely have financial challenges ahead of you and need to start thinking about your financial goals for the next 10 to 20 years.

Have you really sat down and thought about your finances and what you need to do in the next few months? If not, here are five simple steps you should be taking to get off on the right foot.

1. Make a budget

To be a good money manager you need to know where your money’s going and how to allocate it in the future. Having a budget is really the only way to control your spending and to make sure you spend less than you earn.

The first step in creating a budget is to determine your monthly expenses and income. Your income will be what you earn, plus any other forms of income such as interest earned, bonuses, commissions or Christmas money gifts from your parents or other relatives.

Next, you will need to calculate your spending. Since you recently graduated, you won’t have much of a history at this point so some of this may have to be pure guesswork. The important thing is to divide your spending into two categories – fixed and discretionary. Here are some typical fixed categories.

  • Rent or mortgage payment
  • Utilities
  • Transportation
  • Debt repayment
  • Family obligations

Your discretionary categories would include:

  • Food
  • Clothing
  • Health and medical
  • Entertainment/recreation
  • Pets
  • Investments and savings
  • Miscellaneous

You will next need to attach numbers to each of these categories. Since you don’t have much of a spending history at this point some of your numbers may have to be “guesstimates.” But that’s okay as you will learn more about your actual spending in the months ahead and can then adjust your numbers accordingly.

Once you’ve totaled up your spending you need to compare it with your income. If you find your spending adds up to more than your income you’ll need to make some adjustments. Since you can’t do much about your fixed expenses you will have to take a hard look at those discretionary categories to see where you could make cuts.

The important and hardest thing about budgeting is sticking to it. Here are some things you could do to make sure you stay on track.

  • Make budgeting an integral part of your daily life
  • Build in money for the occasional “splurge” or reward such as a night out with the boys or girls.
  • Monitor your spending regularly and make changes or adjustments as necessary

2. Make it a priority to save money

You need to be setting aside money whether it’s to create an emergency fund or put in an employer-sponsored savings plan. Because you’re young you have a powerful advantage over older generations, which is time. If you make saving money a priority now, your money will have years and years to grow and you’ll profit from compounding interest. Most people find that the easiest way to save money is to have it automatically taken out of their paychecks and deposited into a savings or investment account. This tends to reduce the “pain” of saving money because you should quickly learn to live on the “net” of your paycheck. Also, if you start saving money when you’re young it will become a habit that will stand you in good stead for all your life.

3.  Get a handle on your debt

If you’re typical, you graduated not with just a diploma but with a bunch of student debt. The average amount owed by this year’s college graduates is $29,400. While it’s likely that you don’t owe this much the odds are that you graduated owing on some student loans. If you know how much you owe and to who, good for you. If not, you should go to the National Student Loan Data System (NSLDS). It will have a record of all your federal student loans including, the amount borrowed, the loan provider or servicer, the date the money was distributed and how much you owe. The NSLDS even has a thing called a Loan Portfolio where you could store all the information about your loans. Once you have this information is in hand, you will need to make a plan for repaying your loans.

However, if you had private loans (from a bank or some other for-profit organization), they will not be in the NSLDS and you will have to chase down this information yourself.

Video thumbnail for youtube video Revealed – The 4 Greatest Myths Of Credit Scoring4. Learn why it’s important to have good credit

There is a simple fact about personal finances. It’s that the higher your credit score, the less it will cost you to borrow money. You can learn your credit rating by going to a site such as www.myfico.com, www.creditkarma.com or www.creditsesame.com. Your credit score is expressed as a three-digit number and the higher the number the better. Lenders usually make decisions about credit based on tiers as follows:

  • Between 700 and 850 – Very good or excellent credit score
  • Between 680 and 699 – Good credit score
  • Between 620 and 679 – Average or OK score
  • Between 580 and 619 – Low credit score
  • Between 500 and 579 – Poor credit score
  • Between 300 and 499 – Bad credit score

If you don’t believe your credit score makes a difference, here are the different interest rates you’d be charged on a mortgage – based on credit score.

760 to 850  5.780%           620-659   7.096%
700-759       6.002%          580-619    8.583%
660-699      6.286%           500-579    9.494%

As you can see from this table if you have a credit score in the low 600s you will pay a lot more in interest than if your score was in the high 700s.

You should also review your credit reports from the three credit reporting bureaus — Experian, Equifax and TransUnion. You can get your reports one at a time from the companies or all together at www.annualcreditreport.com. The reason why you want to get your reports is to review them as they could have errors that are damaging your credit score.

To keep your credit “good” you will need to keep tack of your loan balances and payment dates and develop a plan for paying off your debts. It’s also a good idea to pay off high interest debt first as this would save you the most money.

5. Protect yourself with insurance

Depending on your age you may still be on your parents’ health insurance. If not, you need to sign up for health insurance. Under the Affordable Care Act (often called Obamacare) everyone must have health insurance. If you don’t, you face the very real possibility of having to pay a penalty. If you don’t have health insurance through your parents or employer you will need to purchase a health plan from either a federal or state-based health insurance Exchange Marketplace.

There are some other types of insurance you also need. If you’re a renter, you should get renter’s insurance to protect against the loss of or damage to your personal property. And, of course, you need auto insurance. Your agent should be able to help you choose your coverage but the important part is to make sure you buy good liability insurance to protect you in the event you were to cause an accident where someone is seriously injured.

5 Routines to Practice Financial Fitness

Consumer running while carrying a briefcaseFinancial fitness is an important aspect of our financial literacy. Similar to athletes participating in several sports, they prepare long and hard for each game. They live with discipline and dedication in order to achieve their goals. The more they practice and prepare for their game day, the better their performance is on game day. They are able to address the needs of the game and quickly adjust as needed.

The same principle goes for consumers in their daily battle with finances. It does not happen overnight. You do not wake up the next morning with all your debts paid off, all your bills paid for, your 401(k) at retirement level and emergency fund that can last you more years than you need. Even if you win the lottery today, it will be a short lived cash happiness without being financially fit and literate.

The Bleacherreport.com even shows that heading to off season, the NBA teams are just as concerned with their financial fitness as they are in keeping their players fit and healthy. The teams need money to pay the salaries of their players and they need the players to generate income for the team. Both area of the business and sport needs to put a premium on fitness to ensure that they can continue their purpose.

Practicing Financial Fitness

One of the world marathon majors, the New York city marathon is one of the biggest marathon events being organized in the world. Now carrying a different sponsor, it used to be ING New York CIty Marathon but is now branded TCS New York CIty Marathon. The event is slated on November 2, 2014 and is set against another challenging course.

The race begins in Staten Island in Fort Wadsworth near the Verrazano-Narrows Bridge. It then passes through Brooklyn and reach the Pulaski Bridge signifying the racers are halfway in the course. The road track proceeds to cover East River via the Queensboro Bridge entering Manhattan. Runners proceed to Willis Avenue Bridge and returns to Madison Avenue Bridge before entering Central Park through Harlem down Fifth Avenue. The race concludes by going back to Columbus Circle near Tavern on the Green.

That is a full marathon circuit and anyone taking that course on November 2 needs to be physically fit. Relating that to financial fitness, that course is similar to the challenges we have to take on in life. As the runners race to the finish line, we practice financial management to get to our goal. But we do not just get up and run the race just as we do not instantaneously get to our financial goals. Aside from the having a financial health checklist, we need to prepare for the actual financial challenge.

Set a goal

The first step is to financial fitness is setting a goal. Just as the marathon runners in New York city has one goal in mind, which is crossing the finish line at a good time, consumers need to also have a goal in mind. This serves as a target to aim for and can regularly remind of the ultimate pay off on all your financial decisions.

Having a goal helps you keep your focus. Say the goal is to pay off your student loan as fast as you can. That goal will help guide you in all your financial decision making. Just like the runners whose main goal is to finish the race, their preparations are all leading to that purpose. They train to get fit to achieve that goal. Your roadmap to your financial goal should be built around your main purpose. It has to lead to your achievement of your financial target.

Budget routine

There are people who are having a hard time grasping and understanding how budgeting works. This plays an important role in practicing financial fitness. Putting together a budget is your blueprint to achieve your goal. It is your step by step process in making sure you are on the right track and don’t go astray.

New York marathon runners train with a specific routine. They follow specific strength training workouts and check their food intake. They measure their performance to check if they are improving and staying on course. This holds true for consumer budgeting.

Your budget needs to keep you on track in achieving your goal. It is there to remind you how much you need every month to cover your expenses. It also lists down all your expenses every month so you can quickly do an audit n where your money is going. It can help you curb unnecessary expense items and save you extra dollars every month

Get debt down

Most runners have an ideal weight that they need to get down to in order to run more efficiently. In financial fitness, think of debt as excess weight that is pulling you down. Physically speaking, it is best to shed of excess weight until you are comfortable with your own body and you can move and go around as much as you want.

This is the same with your finances. Getting debt down can help you move freely with your finances. It opens more financial opportunities and just gives you more legroom to go around. Debt ties up your income to interest payments which is eating up on what could possibly be your emergency fund or retirement fund.

Avoid temptation

There will be temptations along the way as you reach for your goal. For New York Marathon runners, it could be skipping a training day or cheating on their diet. It could also be going around not being serious with the preparations for the run like sleeping late and partying all night long. These temptations steer them away from achieving their goal.

Same goes for financial fitness. Steering away from financial temptations can be a challenge. Just like getting that new mobile gadget or putting in your online cart that discounted European cruise. These are temptations when it will keep you away from your main goal. If the money that was supposed to be extra payment for student loans is used to buy a new guitar just for hobby, then that is a temptation. But if your bread and butter is producing music, then that guitar can be an investment.

Get professional help

New York marathon runners are mostly professional runners. And majority of them have had professional trainers guiding them to their peak health and condition to take on the gruelling marathon course. This is the same for consumers on the road to financial fitness.

There are professionals out there that can help you make better decisions with your finances. There are those as well that can help you manage your debts better. They offer professional pieces of advice that you can use to get out of debt.

Benefits of Financial Fitness

Practicing financial fitness can yield benefits for the consumer. Some of these are:

  • Less stress. People who are financially fit are able to manage their finances better and are in top of the situation. This gives the peace of mind knowing how they are financially performing. Taking a prevention-stance is better than problem-solving mindframe.
  • Better health. Taking on a financially fit goal ripples out to physical fitness. It gives you more sleep and takes away worry. It gives you a good appetite and you are able to eat healthy food rather than wolfing down on ice cream and cake because of too much worrying.
  • Improved focus. You are able to concentrate as well on the task at hand rather than thinking of how to pay for the bill coming in at the end of the week rather than paying attention on your current task.

Investopedia.com tells consumers that fitness is a step by step process. This is made up of small positive financial habits that we maintain over the course of time. As we do it over and over again, we build it into our own routine and helps us get to our goal faster.

In most cases, your financial health is connected with your physical health. So if you want to be physically fit, you also have to work on your personal finances. Here is a video from NBC15 about financial health.

Are You Smarter About Personal Finance Than 16-Year Olds?

woman thinkingOne company recently tested 16-year olds on their knowledge of personal finance with some everyday questions about savings, tax, currency exchange and utilities. Almost a third of those tested scored 43% or less in this test.

Test yourself

Here are the seven questions that were asked. See how many you can answer correctly (answers at the end of this article).

1. Kat paid $5,000 for a car in April 2009. In the first year, the value of the car depreciated by 10%. In the second year, the value of the car depreciated by 15%. How much can Kat sell the car for in 2011?

2. Bob is paid $37,465 a year. His personal tax exemption is $6,000 for the year. If Bob’s income is taxed at 22%, how much income tax does he pay in a year?

3. Leonie has $2500 to invest for four years and can choose between two different savings accounts. Account One pays 3.7% simple interest paid out at the end of each year. Account Two pays 3.4% compound interest paid at the end of each period (year). Which account would give Leonie more interest over the four-year period?

4. Jenny wants to buy a new TV but is $300 short. She sees an advertisement for a loan offering $300 for eight months with a monthly repayment of $50. If she takes the loan, how much extra will she have to pay?

5. Andrew pays his electricity bill monthly. His current charge is $0.046040 per kWh. Last month he consumed 1201 kWh. If next month he reduces his electricity usage to 1100 kWh, how much money will he save?

6. Rachel is going on vacation in Spain and needs to change $300 into euros. The change kiosk in the airport charges 0.6% or $6.73 to change money whichever is the greater. How much will changing her money at the airport cost Rachel?

7. Sophie was left $6,000 by her grandfather and decides to invest the money for two years. Her bank offers her a choice of two savings accounts. Account One pays 3.1% on a monthly basis. Account Two pays 3.25% annually. Which account will give a higher closing balance with no withdrawals?

Understanding personal finance is critical

You’ll see in a few moments as to whether you’re smarter than a 16-year old about personal finance. I certainly didn’t know much about personal finance when I graduated from college and got married. I had worked fairly constantly since I turned 16 and about all I knew was that you should spend less than you earned. Of course, when I was in college I didn’t always follow that dictate. There were many times when I ran out of money before I ran out of month. I did finally learn the importance of spending less than I earned but it took several years for me to learn some of the important basics of personal finance.

1. Learn your spending patterns

The first step in becoming good at personal finance is to determine how you spend your money. I learned that the only effective way to do this was to track our spending for at least four weeks. This meant keeping track of not just the big stuff like rent and groceries but also the very small stuff right down to a candy bar I had at work. I did this the old school way with a notebook and a pencil. Today, thanks to all of the smart phone apps available, this is much easier. For example, if you were to choose Mint.com it would not only track your spending for you but also categorize it so that you would be able to see exactly what you spent in areas such as groceries, dining out, utilities, clothing, hobbies, transportation, healthcare and so forth.

2. Compare this with your income

Once you see what you spent in the past month you need to compare this with how much you earned. When you do this you might be in for either a shock or pleasant surprise. The pleasant surprise would be if you spent less than you earned and had extra money to save or invest. The shock would be if you find that you spent more than you earned. If this is the case, you will need to review all of your spending categories with an eye towards determining where you could make cuts. As a rule, most people find the easiest places to reduce their spending are groceries, clothing, entertainment and dining out.

3. Save more by creating goals

Most people find that it’s tough to save money just for the sake of saving money. What’s better is to create one short- and several long-term goals. As an example of this, your short-term goal might be to take a nice vacation to Florida next spring while your long-term goals might be to buy a new car or to save enough for a down payment on a house. Whatever goals you create, you might spreadsheet them so that you will be able to see the progress you’re making towards realizing them. This can be a great incentive to stay on track in your saving.

4. Read books about personal finance

Assuming that you don’t have a financial mentor, the best way to get a better understanding of personal finance is to read some books. We like The Money
Book For The Young, Fabulous And Broke by Suzy Orman; the classic Think and Grow Rich, by Napolean Hill; Get Rich Carefully, by Jim Cramer; Rich Dad, Poor Dad, by Robert Kiyosaki; and today’s best-selling book on personal finance (according to Amazon), The Total Money Makeover, by Dave Ramsey.

5. Get a mentorcouple talking to a professional

The best way to learn about personal finance is to get a mentor – someone who has been there and has learned how to manage, save and invest money. If you’re fortunate, this person could be your father, an uncle or a cousin. Barring this, you’ll just need to be on the lookout for someone who is a successful money manager, who is well to do and would be willing to mentor you. Just make sure that you don’t come off as too “needy.” In other words, don’t pester that person with several financial questions every day. When you have a question about personal finance, write it down and start a list. Once you have a half dozen or more questions, you could then ask that person to sit with you for a half an hour or an hour to answer them. But try to not do that more than maybe once a month.

The answers to our seven questions

If you’ve been chomping at the bit to see whether or not you’re smarter about personal finance than a 16-year-old, here are the answers to the seven questions we posed at the beginning of this article.

1. $3825
2. $6,922
3. Account #2
4. $100
5. $4.65
6. $18
7. Account #1

So how did you do?

If you were able to answer all seven of these questions correctly, give yourself a big gold star. And congratulations! You’re officially smarter about personal finance than the 16-year-olds who were tested on these questions. On the other hand, if you were able to correctly answer only two or three of them, you need to get to work and read some of the books about personal finance that we listed above. Think of it this way. It might take you several weeks to read one of those books but it could make the rest of your life a lot better. If your personal finances are not currently under control, this would help you better manage them. You would be saving money each month towards your important goals. And it’s likely that this would take much of the stress out of your life.

Here’s Budgeting Advice From Four Top Money Experts

business man looking tiredThere’s an old saying that opinions are like belly buttons – everybody has one. A lot of people also have opinions about budgeting. If you’re lucky you might have gotten budgeting advice from your mother or father. If so it probably consisted of things such as “have an emergency fund,” “don’t spend more than you earn” or the old standby “a penny saved is a penny earned.” And while this is all good advice, the best comes from the real experts – people who have been there, done that and learned from bad experiences about good budgeting.

It’s great to earn money and the fact is the more the better. But what’s just as important is how you spend it. Even if you’re pulling in big bucks but spending it all recklessly, you’re on your way down a very slippery slope. No matter how much or how little money you have, budgeting how you spend it is one of the most critical skills you can learn.

Here are four top money experts each with a piece of advice that could help you do a better job of budgeting.

Cut back 10% in family spending – Suze Orman

You may be familiar with Suze Orman. She first became well known for her book The 9 Steps to Financial Freedom and for a time had her own TV program on CNN. She also had a six-episode TV series America’s Money Class with Suze Orman on the OWN Network. Suze’s budgeting tip is to cut your spending by 10%. This is enough of a reduction that you should start to see your savings pile up very quickly, which would make it easier for you to pay back any debts and cover your actual important expenses.

The good part according to Orman is that 10% is not enough of a cut that you will feel as if you are depriving yourself or your loved ones of anything. As an example of this if you’re used to spending $100 on movies and gaming every month and trim that amount down to $90, this is not going to cause mass angst.

Overbudget for groceries – Dave Ramsey

Dave Ramsey has had his own radio show for many years and has made numerous TV appearances. He is a financial author, radio host, television personality, and motivational speaker who may be most famous for having developed the snowball strategy (see the video below) for getting out of debt. Dave’s advice is to overbudget for groceries. He believes that when most of us put together a budget, we don’t consider our grocery bill at all. Even if we do, we tend to severely under budget. So while we may think that we’re putting $100 into savings every month, $80 of that is probably actually going to buy things that we forgot to calculate in our grocery budget.

His advice is that next time you go to the grocery store, keep all of your receipts and then add them up at the end of the month. Make sure that you include the times that you ate out because even though fast food can hardly be considered food, it still technically is. Then after you have added up all those receipts, add $50 to the total – just in case. That will be your real grocery budget and if you go under it, that’s terrific. Going under is always better than going over.
In the event you’re having a problem with debt and wonder about the snowball strategy for becoming debt free, here’s a video courtesy of National Debt relief where Dave explains it.

Look to the past for inspiration – Rick Adelman

Richard Leonard “Rick” Adelman is a retired professional basketball player and coach. He coached for 23 seasons in the NBA (National Basketball Association) and just retired as coach of the Minnesota Timberwolves. His advice is that when you’re putting together a budget you need to go back in time – obviously not too far back. But you should go back at least a year, find your bill history and then add everything up. If possible try to find receipts from your extracurricular activities such as dining out or movies and add them to the final tally. This should give you an excellent idea of how much you will spend this year and you could then budget accordingly.

Of course, if something serious has changed in the past year such as a new higher mortgage, or heaven forbid, septuplets, you need to adjust for that. But if your life has remained essentially the same since a year ago, this would be a great way to prepare for the present.

Have “Magic” spending jars – Gail Vaz-Oxlade

Gail Vaz-Oxlade is a financial writer and TV celebrity who lives in Canada. She is the host of the Canadian television series Til Debt Do Us Part, Princess and author of the book Money Moron. Gail says that she has been told over and over by people that they don’t know how to budget regardless of how many articles or books they’ve read, how many worksheets they downloaded off the Internet or how many times they’ve tried – they just can’t do it. However, once she started the show Till Debt Do Us Part and introduced the concept of “magic” spending jars, many people are now able to budget successfully.

So what are “magic” spending jars? What these are is that once you’ve budgeted for your fixed expenses and your important variable ones such as food, debt payment and gas, take the money you have for clothing, entertainment, travel, dining out and other similar ventures and put it in a jar. You then use the money in the jar only when you are partaking in those fun events. That way you’ll no longer find you’re surprised by suddenly being broke because you just had to get 10 toppings on that pizza.

Just in case you’ve never made a budget

If you’ve never actually sat down to create a budget the advice from these top money managers might be interesting but sort of like listening to a speaker lecturing in Spanish when you don’t understand a word of that language. If this is you, here are some quick tips for creating your first budget.

1. Track your expenses.

Go back and read what coach Rick Adelman said about digging out your old bills. That’s a good start but you really need to know what you’re doing now, which means tracking your spending for at least 30 days. There are numerous smart phone apps available that will make this easy. We happen to like Mint.com because it’s free, easy-to-use and a great budgeting tool. If you use Mint to track your spending it will then categorize it for you so you can see exactly where your money is going.

2. Create categories.

If you’re not using an app or some financial software to track your spending that will automatically organize it into the categories, you need to do this next. Here is a list of some major categories as a starting point. Naturally, you’ll want to tailor this to your own spending meaning that you may need to add and subtract some categories.

• Home
• Utilities
• Food
• Family obligations
• Health and medical
• Transportation
• Debt payments
• Entertainment/Recreation
• Pets
• Clothing
• Investments and savings
• Miscellaneous

3. Divide by three

Once you have your spending divided into categories, you need to group them as follows: fixed expenses, variable expenses and extracurricular expenses. Your fixed expenses will be those that are the same every month such as your mortgage payment or rent, your utility bills, your auto loan(s), credit card debts or a personal loan. Variable expenses will be those that you know you have virtually every month but that very in cost. This would typically include groceries, clothing, investment and savings and transportation. Finally, ‘extracurricular” expenses would be those that you don’t have to spend money on such as dining out, entertainment and clothing.

4. Add up your fixed and variable expenses

Add up your fixed and variable expenses and compare this total to your monthly income. If they exceed your monthly income, you will have to make some radical changes. You’ll need to take a hard look at your variable expenses to see where you could make cuts. Your objective should be to get your spending down to at least 10% below that of your monthly income. The categories where people generally find it easiest to reduce their spending is groceries, clothing and transportation.

If making these cuts still isn’t enough to get you to at least 10% below your monthly income, you’ll have to become more radical. You may have to move to a cheaper house or apartment, trade in your car for a less expensive one or find ways to reduce those credit card debts.

5. Be flexible

Once you develop a budget, don’t think of it as something hard and fast that can never be altered. You will need to continue tracking your spending and then make adjustments based on what you learn. For example, you could find that no matter how hard you try you simply can’t get a month’s worth of groceries for the $400 you had budgeted. So increase your grocery budget accordingly and then find some other category where you could reduce your spending to make up for the money you’ve added to your grocery category. In other words, don’t think of your budget as something engraved on stone. Think of it more as a game plan.

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

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