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Do You Make These 13 Budgeting Mistakes?

Are you having a problem making ends meet? Do you often run out of money before you run out of month? Are you doing your best to budget your money but it just doesn’t seem to be working? A good budget doesn’t have to be perfect but you need to be able to recognize mistakes you may be making that are keeping you scrambling from paycheck to paycheck. Here are 13 of the most common. Check out this list and you may discover why it is that your budget doesn’t seem to be working.businessman with empty pockets

#1. Neglecting to save for the unexpected

One thing you can expect is that you will eventually run into an unexpected expense. It might be that you lose your job, your car breaks down or you have a medical emergency. When you created your budget with your fixed and variable expenses, did you remember to create an emergency account? You need to treat your savings account as if it were just another expense in your budget and add to it monthly. If you fail to budget for unexpected expenses and one occurs – which it inevitably will – your only alternative might be to put it on a credit card and rack up debt.

#2. Having expectations that are not realistic

When you’re working to improve your personal finances don’t set standards that are too high. Putting together an extreme budget might look good on paper but this approach isn’t always either realistic or effective. For example, let’s suppose that your budget calls for you to stop eating lunch out every day. Is that realistic? Many financial experts say that it’s better to start with small steps. Instead of trying to stop eating lunch out altogether you might pack your lunch to work a couple of times a week and then gradually add another day until you’re no longer eating lunch out at all.

#3. Estimating your spending

When you created your budget did you do it based on estimates? This rarely works because most people find they spend a lot more each month than they thought. A better answer is to track your spending for a month or two before you develop your budget. If you track everything you spend money on, you will be able to see where it’s going and develop a more realistic budget.

#4. Using your gross income as the basis for your budget

Is your budget based on your gross pay or your take-home pay? If you create a budget based on a gross pay of, say, $5,000 a month you’re bound to get into trouble because that’s not really the amount of money you have available for your budget. Your spending plan needs to be based on your net or take-home pay after all your payroll deductions have been subtracted.

#5. Having too many accounts

It can be tough to keep track of things when you have multiple credit cards, checking accounts and savings accounts. If you have multiple store and credit cards it could be difficult for you to track your spending and stay on top of all of your payments, which can lead to financial disasters. A much better idea is to simplify and streamline all of your accounts. As an example of this, you might transfer all of your credit card balances to a 0% interest balance transfer card. Do this and you’d not only have just one payment to make a month you’d have 12 or even 18 interest-free months where you could work on paying down your balance.

#6. Ignoring cheaper alternatives

Some fixed expenses are not really fixed. Take your utility bill as an example. You should review your monthly bill carefully to see if you couldn’t find ways to save. In some states you’re actually allowed to choose which company generates your electricity. If you’re lucky enough to live in one of these states do some comparison-shopping and you might be able to shave your bill substantially. Another example of this is your cell phone bill. If you haven’t reviewed it recently, give it a careful look. The cell phone provider business has become very competitive. You might be able to save money with your current provider by choosing a different plan or you could maybe take advantage of that one company that promises it will cut cell your phone bill in half.

#7. Failing to adjust your variable expenses

Budgeting is almost guaranteed to fail if you’re not willing to modify your spending habits. If when you review your budget you find you’re spending too much in categories such as shopping, entertainment, clothing and recreation you need to be willing to make adjustments. Otherwise you’ll just continue to overspend every month.

#8. Not updating your budget

The author Louis L’Amour once said, “The only thing that never changes is that everything changes.” Your life will change from year to year and so should your budget. In fact, the budget you created last year could already be partially irrelevant. If you want to avoid problems with your cash flow you need to update your budget on a regular basis. And if your income has increased don’t forget to add that.

Two smiling girls have coffee time#9. Attempting to keep up with the “Joneses”

Your friends may not have the same financial mindset as you or may not be as budget conscience. In fact, they may be living well beyond their means. If you try to keep up with them you’ll end up blowing more money than you can really afford. You don’t need to cut these people totally out of your life but just be careful about those with whom you shop.

#10. Neglecting to include irregular expenses

It’s good if you already have an emergency fund to cover your unexpected expenses. But you also need to make sure that you budget for those expenses that are irregular – like your insurance premiums or tax payments – that happen just once or twice a year. The best way to handle these types of expenses is to take their totals, divide it by 12 and then add this amount into your monthly budget.

#11. “Borrowing” money from other categories

A mistake that many people make is to borrow money from other categories when they run short in one. If you have a week left before payday and have spent all of the money in your entertainment budget, don’t borrow from your grocery budget. That’s just a surefire way to mess things up.

#12. Failing to budget for fun

Spending less money and being serious about your budget doesn’t mean you have to sit at home every day staring at your HDTV. You need to blow off steam occasionally and it’s not irresponsible to have a little fun with your money. No matter how careful you are in your budgeting it won’t work long term if you fail to allow for some fun stuff even if it’s just going out to a movie every couple of weeks.

#13. Not choosing the right budgeting software

It seems like there are a zillion different budgeting tools and apps available and it’s important to choose the right one. Many people choose just because it’s popular and they’ve heard of it. But it may not be right for you. You need to look at some different options and then choose the program or app that you would be most comfortable with. Pick one, experiment with it and then if it seems too complicated or cumbersome, move on to different one until you hit on one that works for you.

Finally, here is a brief video courtesy of National Debt Relief that reveals several other common mistakes people make in budgeting.

Budgeting For People Who Hate Budgeting

When you hear the B word as in budgeting, does it cause cold chills to run up and down your spine? Or maybe it feels as if someone had just run his or her fingernails up and down a blackboard. If you hate budgeting it’s probably because you’ve always tried to do it the hard way, which means tracking every single little thing you spend money on down to that candy bar you purchased at work last week. Then you had to get out all of the receipts you saved so faithfully, your credit card statements and your checking account statement, make a list of everything and then divide it into categories. Ouch!budget on top of money

Then there’s figuring out how much money to allocate to each category, hoping that when you total it all up there will be money left over to save or to pay down your credit card debts. But that’s not even the hardest part. The hardest part is sticking to that budget. This is so much work we can understand why you would hate the B word. Well, take a deep breath and relax. There is a much easier way to budget but that will still get you to where you want to be.

No complicated tracking schemes

If your goal is to get your finances under control without the headache of budgeting the traditional way there are easier answers. It begins with making a simple spreadsheet. List on it your monthly expenses and income. Don’t have a cow over your expenses. Just estimate how much you spend each month by general categories. You can probably do this in about five minutes.

Have just a few categories

There’s a lot of budget software out there where you are required to fill in a zillion different categories and subcategories. If you’re kind of a linear person this can be useful but it’s not required. Use broad categories instead like food, gasoline, entertainment, housing and utilities. You can always make adjustments or add more categories later.

A simple budget

There are many different ways to organize a budget but the easiest is what’s called the “60% solution.” This just means fitting your normal monthly expenses into 60% of your net income so that you will have room left over for savings, retirement and “fun money.” These are the areas that can break you budget if you forget to include them.

What goes in the 60%?

These should be your monthly expenses including housing, insurance, food, Internet, and transportation. And yes, this is the part that is generally thought of as being your budget.

The rest

Of the 40% you should have left then 10% should go towards your retirement. The easiest way to do this is to have the money automatically withdrawn from your checking account and put into your 401(k) or IRA. If your employer offers a 401(k) that’s where the money should go at least for now. Ultimately you will want to have an IRA, too, but that’s the subject for another article.

A second 10% should be allocated towards debt reduction or long-term savings. This is money that you should invest in stocks, a mutual fund or an index fund and can also serve as an emergency fund. If you’re having a problem with debt, you should use this money to pay it off and you might even want to take some money from another of your categories such as retirement so that you could increase this to about 20%. Of course, once you’ve gotten your debts paid off then you can change back to long-term savings. In the event that you are working to reduce your debts, you should also create a small emergency fund out of either this category or the next one.

Short-term savings

A second 10% should go for expenses you can’t exactly anticipate. This would include auto repairs or maintenance, medical expenses, birthday and holiday gifts and home maintenance. Don’t be afraid to spend this money when these expenses crop up.. That’s what it’s for. When you run into these expenses the money will be there to cover them instead of having to take it out of one of your other budget categories or worse yet putting it on a credit card

Fun Money

Here comes the good stuff. As mentioned above, you need to have some fun money and this should be the final 10% of your budget. You can use this money to eat out, go to movies, buy books, go clubbing, camp out overnight or whatever it is that you enjoy. And you can do it guilt free because you’ve covered all your other bases.

Pay all your bills online

You can simplify your financial life considerably just by arranging to pay all of your bills online. This should be most of the stuff in your 60% category such as rent or your mortgage payment, utilities, cell phone, etc. If for some reason you can’t pay these electronically arrange to have your bank mail checks to your vendors. And arrange to have these payments made automatically so that you will never have to worry about missing a payment.

Automate your savings, too

You can also automate your saving, which makes it much easier because it’s harder to miss money you never see. Get a high-yield online savings account such as from ING Direct, or HBSD and have transfers made automatically to it from every one of your paychecks.

Use cash for everything else

Assuming that you’ve set up automatic bill paying and saving you should be able to pay cash for everything else such as your fun money, gas and groceries. You can go to your bank, credit union or a nearby ATM and get the money twice a month. The reason that you want to do this instead of using credit cards or checks is that it’s simpler. When you pay cash for things you never have to worry about overspending. In fact, you shouldn’t use credit cards unless you absolutely have to such as when you’re traveling.

woman with a full grocery shopping bagHave three envelopes

If you decide to use cash for the three categories listed above, get three envelopes and label them accordingly. When you go shopping for groceries, bring the groceries envelope with you. You will know exactly how much is left in that category before you begin shopping. Pay for your groceries out of the envelope and you’ll easily be able to see how much is left. It’s simple and requires no tracking. Of course, when the money is gone, it’s gone. You’ve spent the amount you budgeted. If you’re a few days short of when you will next get cash, you could move the money from one envelope to another with no need to make adjustments to your budget.

Just 20 minutes a week

There, you now have a budget, you’re organized and you have your finances under control. However, you’ll need to do some maintenance and that should require only about 20 minutes weekly. Schedule each week a day and time to review your finances. Spend that time putting your transactions into your financial software or spreadsheet. Assuming you’re using the plan outlined in this article all you’ll have to do is go on the Internet review your bank account and enter the bills you paid, deposits, ATM withdrawals and any fees you were charged. You might want to spend another 5 to 10 minutes reviewing your budget to make sure that all of your bills were paid. If not, pay them. It’s that simple.

Having Trouble Staying On Your Budget? Here’s 8 Tips That Could Help

budget on top of moneyYou do have a budget, right? No, you say. Well, then you need to develop one. There is not a successful business in this country that doesn’t run on a budget or what’s euphemistically called a business plan. Most “successful” families also run on budgets. If you don’t have a budget you should get started creating one. It’s not really all that tough. There are actually a couple of approaches to creating a budget. The simplest one is to get out your last month’s bank statement and all your credit card statements then sit down, add everything up and then compare this to your earnings. If you find you’re spending, say, 10% more than you earn you now know you need to cut your spending by at least 10%.

A second option

A second way to get to a budget is by tracking your spending for a month and by this we mean writing down everything you spend money on from your utility bills to that soda you had at work yesterday. This should give you a totally accurate picture of your spending.

Whichever you choose

Whether you choose the simple or more difficult way to learn where your money’s gone the next step is to divide your spending into categories. The most common categories are:

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

Of course, depending on your circumstances you may eliminate some of these categories or add others.

There’s yet another way to create a budget that’s called the shoebox method. Here, courtesy of National Debt Relief, is a video explaining it.

Tighten the screws

Now that you know where your money’s gone the next step is to determine what you want to do in the future, which is the budget. If you learn that you’ve been spending more than you earn or if you haven’t been able to save money you will need to tighten the screws by cutting your spending in some or all your categories. Most people find the best categories to reduce spending are clothing, entertainment/recreation and food. Your goal might be to reduce your overall spending by 10% or even more – depending on what you learned when you analyzed your spending.

Staying on a budget can be hardfrustrated woman with a paper and calculator

There’s no question that creating a budget can be hard and frustrating. And staying on that budget can be even harder and more frustrating. But once you have a budget it’s critical that you stay on it. Having and staying on a budget can mean fewer financial problems and much less stress. If you’re married then having a budget can even help your marriage. One of the biggest bones of contention between couples is money and when you have a budget to manage it this reduces a lot of the financial stress and the arguing that often accompanies it. So what can you do to stay on your budget?

1. Use cash for discretionary spending

Once a week take out the cash from your bank or an ATM that you need for that week to cover your discretionary expenses or those things that you could live without. You will probably find it easier to not buy those great shoes on sale for just $50 if it will take the majority of that week’s cash.

2. Cut out your bad habits

Stop and think for a minute about your bad habit. Is it smoking or alcohol? These are habits that can be very expensive. If you cut out a bad habit then you will have that money to put towards your other expenses. You should see your bills go down and your health get better. Down the road, you’ll also save on health care expenses and might even qualify for cheaper insurance premiums.

3. Share the obligation

One thing you don’t want to be for sure is the only person in your family that’s worrying about the budget and saving money. There’s no way you can win the battle if your partner is spending you into debt. The two of you need to make a plan as to how much spending money each of you will have. Sit down once a week and do a reality check to see how you’re doing. When the budget is everyone’s responsibility then everyone has a stake in things. This will ultimately make a big difference. It’s just not fair that one person has to shoulder the entire burden by him or herself.

4. Pay down your debts

Credit card debts especially can bog down your entire financial situation. If you don’t pay off your balances each month, the money will be added to next month’s balance as well as the additional interest. When one month’s interest rate is rolled into the next it’s “capitalized” and this means you end up paying interest on the interest. There are two ways to get debts under control. One is to put all of your efforts against paying off the debt with the highest interest rate, as this will save you the most money. Then go to work on paying off the debt with the second highest interest rate and so on.

The other way to get your debts under control is called the snowball method. This is where you concentrate first on paying off the debt with the lowest balance. You should be able to do this fairly quickly and will then have more money available to start paying off the debt with the second lowest balance, etc. In either case if you have other debts you must remember to continue making at least the minimum payments on them.

5. Keep all your receipts

Regardless of how you determined your spending you now have a budget and it can be very tempting to stop keeping up with every little expense. But if you do keep your receipts this can really help you stay on your budget. You should also write down the places where you spent money but didn’t get a receipt. You should find it more difficult to overspend when you can see how much money has actually gone through your hands.

6. Keep your checkbook balanced

If you don’t balance your checkbook regularly it’s important you start doing so. This is especially true if you’re on a tight budget. This is because just a few small mistakes could end up in overdraft charges or insufficient funds in your checking account. If every time you get a statement from your bank you balance your account, this can help you make sure you stay on your budget and in the black.

7. Continue to analyze your spending

Reducing your spending should be an ongoing process. Try to sit down at least once a month with your budget and your receipts. See if there are expenses you could cut. Do you go out for lunch every day? Maybe you could take your lunch to work a couple of days a week. If you have a fairly long drive to work you might be able to set up ridesharing with a co-worker or even take public transportation. Every cent you save by cutting gas costs and the cost of eating out will be money you will have available to save or for big purchases.

8. Stay the course

Life is full of unpredictable happenings. Your budget should include something for them as well as variable expenses. And be flexible. Don’t beat yourself up if you go over your budget occasionally. If you make a mistake or two, it can be frustrating and a bit difficult to get back on track. But it’s important that you do so because the longer you can stay on your budget the bigger the rewards you will earn in the years to come. The important thing to keep in mind is that budgeting is worth the effort and that staying on a budget will help your life run more smoothly, as your finances affect so many things.

7 Ways Your Budget Plan Is Being Compromised By Your Expenses

wallet with a band aidIf you are trying to practice smart spending, there is one tool that you will need to have: a budget plan. After the Great Recession, more and more consumers understand the need for budgeting in their financial lives. But that understanding does not necessarily come with application.

Although more people are budgeting, it is not enough to correct the spending habits that have ruined a lot of consumers during the economic collapse. According to the McKinsey Consumer Sentiment Survey, more people are living from paycheck to paycheck compared to 2012 and 2013. Also, more people admit to a decreased ability to make ends meet. The results published on revealed that more consumers may be optimistic about the country, but that does not mean it is making our financial situation better. For a lot of us, things just seem to be stagnant – not improving but not declining either. This is not a good indication when you think about the improvements in the economy.

One cannot help but wonder – what would it take to improve our financial situation? A budget plan can certainly help.

7 overlooked expenses that can cripple your budget

There are many ways that budgeting can help us improve our finances. In can actually help us with our debt payments. It can also help us understand the limits of our spending so we are kept from overspending. It can even help us fulfill a lot of financial goals. There are several benefits when you implement and follow a budget plan but the thing is, you have to make sure that it is effective.

While your implementation and commitment to follow a budget is the key to its success and effectiveness, you need to understand what can ruin it. One of the things that has a great effect on your budgeting success is your spending.

An article published on revealed that Americans belive tht the economy is improving. This may be good news but it is also leading a lot of consumers to spend more than what they think is allowed by their unique financial position. The article mentioned how consumers are now more courageous when it comes to making purchases like new cars, electronic devices and other appliances. While the financial circumstances may be making it more possible to make the purchases, it does not signify that the economic situation in the household is ready to hold these commitments. In fact, there are a couple of expenses that may have escaped your noticed and are actually draining the effectiveness of your well constructed budget plan.

Here are 7 expenses that you should be careful with.

  1. Maintenance and repairs. This holds more true for vehicles but it also applies to your home. A busted transmission in your care may not be a huge expense but it could enough to throw your budget plan off balance. A string of car repairs can also force you to use your credit card and thus put you in debt. You have to ensure that your vehicle is well taken cared of and goes through a regular maintenance check to avoid expensive surprises. You need to think about these things and include them in your budget plan to avoid the effects of an expense you are not prepared for.
  2. Occasional events. A perfect example of this are weddings. They only happen once and even if you were just invited, it will still cost you to buy a dress or a gift for the event. Not to mention travelling to where the wedding will take place – if it is a destination wedding. Unless you can get the funds from one category in your budget, you may want to just decline going to the event – lest you end up in debt.
  3. Extracurricular activities for the family. This includes any sports related activities or training that your child would like to have during the summer. If your child is passionate about a certain sport that requires expensive training, how can you manage paying it all off. It pays to talk to your child so you can plan around these expenses and thus get yourself ready for it. You can include it in your budget plan – specifically in the part where your savings are.
  4. Pet expenses. While they are not as expensive are children, they can still rack up costs each month. You need to think about their food, veterinary care and everything that will help them live comfortably with you. Do not ignore their needs because a sudden trip to the vet may lead to a financial problem.
  5. Spikes in utility expenses. You may have created a flawless budget plan but have you considered how it needs to change over time? For instance, your budget for heating may not be the same in the summer and winter. Factor in these changes in your budget so you will not fall short anytime during the year.
  6. Health expenses. An unexpected medical expense, no matter how expensive are something that you need to prepare for. In fact, a lot of people have fallen into a financial crisis because of an unexpected illness. Do not let this happen to you or any of your family.
  7. Unplanned snacks. This is something that most of us are guilty of. This is a small expense – but that is what makes it very dangerous. Since it is a small expense, we rarely put it in our budget plan. And the amount is also the reason why we are not guarded when making these impulsive purchases. If you do it everyday, this small amount will add up. Make sure to know how much you are allowed to spend each day so you will be kept from overspending on your budget.

Make sure that you will not overlook these expenses. A budget plan may be able to help you  get out of debt, but its failure may also keep you from seeing that debt is creeping back into your life.

Here’s an interesting way of managing your money

You have to understand that budgeting is something that some consumers are not enthusiastic about – even if it will lead to their financial independence. That may be caused by its reputation for being a tedious task to do. This may be true – but mostly at the beginning. You have to make sure that the details of your budget are all correct. But even if the bulk of the job is at the beginning, you need to continually check on it as your life changes.

The truth is, budgeting is very important because it helps you practice money management. You may not like the traditional budget plan, there are ways for you to organize your finances.

An article from discussed three simple steps that you may want to follow. It is not as tedious but it will make sure that the important goals of a budget plan is covered.

  • Automatic transfers. First of all, you want to set up automatic transfer for regular payments that you make. This includes your rent or mortgage, saving goals, retirement, taxes, insurance, etc. Any payment that is consistent in amount and due date can be paid this way. This will allow you to get rid of the details and just concentrate on the total amount that your account has to have each month. You can include all your priority expenses here – even if they are estimated. Just make sure your estimations will always be more than the actual payments. That way, you will not be charged with late payment charges caused by insufficient funds.
  • Strict discretionary funds. The second step is to set up an amount that you can use each month. After defining the amount, you can enjoy spending it however you wish. With all the priority expenses taken cared of, you can enjoy this money as you see fit. Of course, when you spend it before the month ends, you have nothing left. That means a bit of control and monitoring is still in order.
  • Balance your accounts each month. This type of money management will not give you a tedious monitoring task but you still have to make sure you stuck to your budget. This is why you need to reconcile your account at the end of the month to make sure that your payments are met and you have sufficient funds to meet them.

This is one option that you can do in place of budgeting. What you will prefer to use will depend strictly on your personality of course. Both are effective but you may find that following a budget plan can help you develop the right financial habits and enjoy the benefits of having organized finances. Here is video that will enlighten you about the benefits of following a budget plan.

“Why Can’t I stay On My Budget?

We don’t know of a single financial expert that wouldn’t advise people to make a budget and stay on it – assuming you’re not one of that fortunate 1%. In that case you’re probably not reading this article anyway so it doesn’t matter.

Why is it important to have a personal budget?

It’s basically for the same reason that every successful business has a budget in the form of a business plan. It’s because without a budget, it’s practically impossible to know where you stand financially and what will happen to you and your family in the future.

How did you arrive at your budget?

One of the principle reasons why people fail to stay on their budgets is because they didn’t budget correctly. Maybe they tried to make a budget too hastily and without doing the homework first. The first rule of budgeting is that you must know where your money’s going so that you will know how to allocate it in the future. The only real way to do this is to track your spending for at least a month and by this we mean all of your spending – right down to that candy bar you bought at work. After those 30 days you will need to divide your spending into categories. There are a zillion online sites where you can find a list of these categories but the major ones all tend to be the same – food, clothing, utilities, transportation, medical expenses, debt payments, entertainment and so forth.

If you need help making a budget, watch this video from Bank of America …

Your budget is too inflexible

If you’re having a really hard time staying on your budget the reason may be that it’s too inflexible. The best way to think of a budget is like a football team’s game plan. While the team’s coach might have a complete game plan in mind, he will watch the game as it unfolds and then make changes accordingly. If you’ve become discouraged because you’ve “busted” your budget in several categories, don’t give up. Review the amount of money you’ve allocated to each category and then make adjustments. You’ll probably find a category or two where you didn’t spend as much money as you had anticipated. Take the money out of those categories and assign it to the ones where you were unable to stay within your budget. The important thing is to review your budget regularly and then make corrections just as a ship’s captain will tack and jibe as the winds change.

You failed to set goals

Your budget doesn’t exist in a vacuum. If you’re unable to stay on your budget the reason might be that it’s not linked to your goals. What are your goals? Is your goal to retire early, buy a second home, sail around the world or pay for your kids’ education? Since the real purpose of a budget is to save money you need to ask yourself why you’re saving it. When you have goals your budget will help you make progress towards achieving them, which can keep you motivated to stay on your budget. What’s best is to have both short- and long-term goals. You could then see you’re making progress towards realizing a short-term goal without becoming discouraged because you don’t see you’re making much progress towards achieving a long-term goal – especially when things get tough. As an example of this it can be discouraging if your only goal is early retirement and you suffer a setback in your career and feel you’re not saving enough money to achieve it. But if you also had a short-term goal of taking a nice two-week vacation next year and you see you have almost enough money saved to pay for it, you might feel less discouraged and more motivated.

Your partner isn’t onboard

There’s an old saying that it takes two to tango. It also takes two for a budget to work. If your spouse or partner isn’t interested in budgeting or consistently fails to stay within your budget for whatever reason, the two of you need to have a serious talk. You should sit down with your spouse or partner and try to determine what can be done to get them to buy in. You will need to discuss your financial philosophies and have all your numbers available. You might be able to show him or her that your budget isn’t terribly restrictive and that there is room to make changes. Try to get him or her to understand that your budget is a roadmap designed to get you to your important goals. If your spouse sees he or she won’t have to make drastic changes in their lifestyle you may get more cooperation. If you can stay calm during this discussion – without getting upset – you may find your spouse will be more willing to work with you.

There was no emergency fund

Every budget needs to include an emergency fund. This is so that when you run into an emergency and, trust us, you will eventually run into an emergency, you will have the money to pay for it without having to run up debt. Most financial experts say that you should have the equivalent of six months of living expenses in your emergency fund. If the idea of saving this much money seems too awful, try for at least three months worth. If you don’t already have an emergency fund, make it a line item in your budget so that you’re saving money for it every month. One easy way to do this is to have the money automatically withdrawn from your checking account and deposited into your savings account each month. You might think of your emergency fund as a personal life insurance policy but that the “premiums” are yours to keep.

You didn’t give it a sufficient amount of time

If you made your budget just a few months ago and feel it’s just not working then maybe it’s because you didn’t give it enough time. One way to overcome this is to consider those first few months to be a sort of beta test and now you’ve learned enough to make a real budget. It can take time to smooth out a budget and for you to make changes in your spending habits. Don’t beat up on yourself if you haven’t been able you stay on your budget for those first few months. Professional athletes didn’t get to be the way they are overnight so don’t get discouraged if you haven’t become a professional budgeter in just a few months.

You just hate budgeting

If you find you just hate budgeting what with all that software, columns and rows of numbers, you need to look at other ways to manage your money that would eliminate this. For example, you might withdraw the cash you need for a week or two weeks at a time with the idea that when it’s gone, it’s gone. Or you might try the program Mvelopes, which is based on the old envelopes strategy for budgeting. This is where you divide your paycheck into envelopes based on your categories. Then when that envelope is empty, that’s it. You can’t spend any more money in that category. Of course, with Mvelopes this all happens digitally on your computer and not in actual paper envelopes.

If neither of these options appeal to you and you just hate budgeting, what can you do? You will need to do some research to see if you can find a money management plan that would help you achieve your goals without that terrible demon called budgeting.

Why Budgeting Should Not Be Likened To Dieting

money and measuring tapeBudgeting is said to be the first step towards financial independence. If that is the case, then why is it that a lot of Americans are finding it difficult to maintain a budget? In some cases, they even have difficulty in starting one.

This is probably caused by the lack of motivation to follow a budget plan. This is especially true if you think that a budget is a lot like a diet.

In truth, there are a lot of similarities between the two. An article on actually discussed various similarities between dieting and living on a budget. In fact, the author of the article mentioned that a diet is defined as restricting one’s food intake. The same is actually happening when you are budgeting. You restrict your spending on some things so you can keep yourself from running out of finances of the expenses that matters most. In general what you want to happen with your budget is to stop overspending your money.

However, there are people who have not been successful with their budgets because they associated it with dieting. That is because in terms of motivation, comparing a budget to a diet is not the best way you should go about it.

3 ways diet concepts can ruin your budget intentions

An article published on in 2011 is titled, “Why a budget is like a diet – ineffective.” In one part, the article discussed how humans are notorious for not being able to follow plans. While there are those who undoubtedly can, there are also people who are incapable of doing so. In fact, some consumers frown upon budgeting as they would a diet plan. The article said that it is because a budget feels so much like dieting – that is why it is met with so much distaste. People end up shying away from budget plans simply because it is associated with diets.

The reason why people are scared to budget in the same way that they are of dieting is because it is oftentimes associated with these three concepts.

You feel you have fewer options

When you are on a diet, you are oftentimes told to eat only healthy meals. That makes your options quite limited. You are not allowed to eat certain food and drinks in order to keep yourself in tip top shape. Unfortunately, a lot of the food that we are told not to eat are those that taste good!

The same is true for budgeting. When you create a budget plan, you are faced with the reality of how much you can really afford to spend. After you identify your net income, you need to divide it among the important expenses that you make each month – for the house, utilities, food, transportation, etc. Whatever is left will have to be put aside for your savings. There is not much room for splurges or unnecessary spending especially when you have debt payments to include in your budget.

However, you do not have to feel this way about budgeting if the few options are the most important expenses that you have in your life. Even if you had to cut back on a lot of things, if the vital expenses are met, then you should not feel that you have fewer options. You just gave up on the spending that you do not really need.

You feel deprived

Since you have fewer options when you are budgeting, you will naturally feel deprived. When you are on a diet and you love to eat junk food, greasy food and all the other fattening stuff, you will feel deprived after entering a diet plan. These are the big no-nos in dieting.

In the same way, following a budget would also mean you have to stop doing the habits that are bad for your finances. Things like impulsive buying or buying things without comparing prices. These practices can be harmful to your finances. Your budget plan will deviate you from these practices and this is why you are bound to feel deprived when you are budgeting.

But just like the first, you do not have to feel deprived if you also focus on your priorities. As long as the priorities in your life are satisfied, you should not feel deprived at all. We make budgets hard to follow because we keep our eyes on what we cannot do. But if you concentrate on what you can now achieve (e.g. bigger savings, room for investments, lower debt balance), then you should not feel the deprivation at all.

You feel the pain

Lastly, dieting is usually associated with a lot of pain. This is mostly caused by the exercise that you need to do while you are regulating your food intake.

In the same way, budgeting could bring you some sort of pain as well. First of all, a budget plan is not a one time effort. You need to constantly monitor it and revise it as your financial needs change. Not only that, if your budget reveals that your current income is not enough, you may be forced to look for a second job in order to make ends meet.

Some people may say that if a budget will force me to work 2 jobs, why would they want to create a budget plan in the first place? While the sentiment is understandable, you should realize that not acting on what your budget plan encourages you to do is only delaying the inevitable. If you are spending beyond your means, you are bound to accumulate a lot of debts. Your budget will save you from that but you need to deal with the sacrifices that come with it.

Tips to make budget plans more bearable

In the end, budgeting and dieting may have some negative things in common but the bottom line is, they are both necessary because they keep you from bigger problems in the future. But if associating one with the other will keep you from incorporating a budget plan in your life, then you do not have to treat them the same way.

A budget plan is still different because it involves your finances. You need to look at a budget in such a way that will liberate you from the threat of a financial disaster. A budget can really improve your finances because it helps you be in control of your money.

According to an infographic found on, more than half of Americans do not have a budget and that one-third is unable to pay their bills on time. There may be a lot of factors involved as to why consumers cannot pay their bills on time but you can bet that one of these reasons if a lack of a budget.

In case motivation is a problem, here are some tips that might help you set up a budget in your life.

  • Start with a goal. This is the best motivation that you can give yourself. It can be to get out of debt or save up for retirement.
  • Go slow. If you discover that you have a lot of expenses that are unnecessary and that you have decided should be cut off, try to do it one at a time. Do not go cold turkey to keep the pain from becoming too hard to bear.
  • Create a timeline for your goal. Keeping in mind that you need to go slow, create a reasonable and realistic timeline to achieve your goal. That way, you will not push yourself too hard or be too relaxed in reaching your goal.
  • Make your budget as accurate as possible. Wrong entries in your budget might lead to incorrect assumptions and thus the failure of your budget.
  • Get support. If things get really tough, you may want to get support from family and friends. Or if you can afford it, go and get professional help. In most cases, the first few steps are always the hardest. But once you get one foot in front of the other, you will find yourself effortlessly following your budget.

To learn how to set up a budget, here are some tips from National Debt Relief.

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 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 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, 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, 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, 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. 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 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 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 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.

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