Anyone can create a budget but very few succeed in what they set out to do. One of the critical…
Anyone can create a budget but very few succeed in what they set out to do. One of the critical pieces of a successful budget planning is to clearly separate your “needs” and “wants”. Once you have figured this out, it will be lot easier to see where your money is going. Once you know where your money is going, it’s time to start making decisions about what matters most. Follow these tips to get going. You must prioritize your “wants.” This is where you’re going to be making the big cuts, so figure out what you care about and what you can live without. This is also an area where your family might feel the pinch of budget planning since you’re going to eliminate “unnecessary” expenses. What constitutes an unnecessary expense is a very subjective matter. For example, drinking Starbucks coffee every morning may look like a necessity but you can substitute it with home made coffee and save money. So in a nutshell, you don’t have to give up all your “wants” and can still save money by making smart and meaningful substitutions.
Another example could be your cable TV bill. Do you have premium channel that you don’t even watch? Have you taken a close look at bundling your services? For example, you can bundle your internet service, your home phone and Cable TV in to a single bill and that could easily save you up to 30% of the original bill. Cancel whatever you don’t use regularly or don’t get your money’s worth from. Consider lower-cost options for your “needs.” Do you really need a cell phone and a home phone? Assess, evaluate and make changes as necessary. Be realistic. Be careful not to get so idealistic that you create a budget you can’t live up to.
If you have been big on credit card use, it’s time to put away the plastic. Credit cards can be real trouble on a budget because they provide the opportunity to spend money that you may not have and whether you have it or not, you must repay it with interests and late fees. So make it easier on yourself and leave the credit cards at home. Credit cards can cause havoc on your finances and we don’t recommend using them unless you’re an individual with serious fiscal discipline and who pays off the balance every month. If you have to have credit cards in your pocket for some reasons, see if pre-paid credit cards can help. They are much better than writing a check at every single store or paying cash everywhere.
Take a closer look at your debt. If you’re working on your budget, consolidating your debt can add some extra cash in your pocket. For example, if you have two credit cards with 15% APR and $5,000 balance each, If you consolidate them both with a credit card with 5% APR for life, you’re going to see an instant 10% break on your interest payment. So $10,000 balance would result in $1,000/year in saving. That’s almost $100 a month.
Creating a budget doesn’t always mean cutting back on spending, it also means realigning your money with the options that cut excessive interests, payments, fees and penalties. If you’re in credit card debt,, know exactly what you owe and make a payment schedule to get it paid off. And don’t just pay the minimum due-it’ll likely take years to get it off your back.
Treat your savings account like a bill-set a monthly amount for yourself and start putting it away. Even if you can’t afford to save much now, the fact is it goes hand-in-hand with successful budgeting and will be vital to successful financial planning in the future. Be honest with yourself. Identify your spending habits and determine whether or not you need to exercise a little more self-control.
Home is where a large percentage of your money goes. If you rent, consider getting a roommate to cut down on your rent payment. If you own a home, saving potential is even more due to possible DIY projects. Whether it’s fixing a broken toilet seat or replacing a light bulb, do it yourself. It’s not hard, it’s much cheaper and you’ll have a great sense of accomplishment afterwards. And if you don’t, well, at least you still have the money in your pocket! Turn down the thermostat. Turn it off when you’re out of the house; Install a programmable thermostat. Set it to turn on about 15-30 minutes before you get home-the place will be comfortable, and so will you, knowing you didn’t waste a whole day’s worth of power. Turn off the lights, TV, stereo, etc. when you’re out of the house.
They last substantially longer while consuming much less energy. An average American home can save $300/year by switching to low energy bulbs. They produce comparable or even more light with just 30% to 50% of the energy cost of regular filament bulbs. Install a low-flow shower head. You can drastically reduce your water expenditure by switching to a low-flow shower head.
A poorly-insulated house is a huge energy waster. Inspect your insulation and weather stripping regularly and keep it well maintained. If your house has old energy inefficient windows, you might get a rebate from your electric company by switching to more efficient energy windows. Contact your local energy company to find out if they have such a program.
If you make lots of long distance call, switch to a calling card. Phone call made on regular phone company plan are subjected to various taxes and FUSF(Federal Universal Service Fee) charges that could be as high as 15% of the total bill. Adjust your cell phone plan. Do you always have minutes left on your monthly plan? May be downgrade it to a cheaper monthly plan. If you have more than one cell phones, switch to a sharing plan where multiple phones can share the monthly minutes available. Now that your family budget is planned, you should consider a follow up plan.
Remember, a month of good budgeting can easily be blown by a day’s worth (or less) of impulse spending. It will take discipline, but mastering it will be vital to your budgeting success.