Managing Spending
Do you always seem to fall short each month no matter how hard you try? Day to
day spending adds up. Gain control of your finances by learning how to budget
and live within your means. You can meet your financial goals once you set
limits and know where your money goes. Check out the following links:-
Discover Yourself! Track your Spending
Most people think they know where their money goes, but are shocked to discover
the truth. Experts say that most people, from all walks of life, spend about 20
percent more than they think they do.
A sure way to find out where your money is going is to track your spending over
a period of time. To begin, carry a small notebook and record your daily
spending (all of your expenditures, however small). Use this information to
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identify areas where spending can be cut
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redirect your income toward the things that matter most
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create a monthly game plan (budget) for your spending
You may find it easier to track spending if you:
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save your receipts and write on them what was purchased
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use checks (if you have free checking) for all purchases above $10
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record all checks and ATM withdrawals in your check register
Track your spending for a month or two, and then ask yourself:
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Where did most of your money go?
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Were there areas where you were surprised by how much you spent?
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Are there areas where you could cut back?
Get Your Spending Under Control
Every dollar you spend is a dollar you won't be saving or investing. Yes,
you'll get another paycheck soon. But that particular dollar is gone forever.
Here are a number of ways you may choose to cut spending.
Use your checking account One of the best tools for controlling spending is a
checking account. It gives you an easy way to track your spending and keep tabs
on how much you have left. It also saves you:
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check-cashing fees at currency exchanges
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the cost of money orders to pay routine bills
Six Ways to Control Your Spending
Stop impulse buying Impulse buying is one of the easiest ways
to throw away money on things you don't really need. Here are some ways to
regain control.
Make a list Make a list before you go shopping, then try to
stick to it. Ads, store displays and coupons will try to entice you to buy
things that aren't on your list. Use your list to help you resist.
Shop when you need to Shop when you need something, NOT for fun
or to cheer yourself up. That's when you're most prone to impulse buying and
bad shopping judgment.
You're the boss Before making any sizeable purchase, leave the
store to think it over. If the salesperson has been using pressure tactics,
don't go back. Pressure tactics include statements like "It's the last one in
stock." "If you buy one right now, I'll give you an additional discount." "This
is a once-in-a-lifetime deal."
Is there an alternative? Is there a less expensive alternative?
Frequently, you can save by buying a less-expensive model. You can also buy
just about any quality item second-hand. Check the classifieds in your local
newspaper, or use the Internet.
Buy, rent or borrow Consider renting or borrowing instead of
buying. For major purchases, such as a snow blower, lawn tractor, etc., ask
yourself if you will use it enough to justify owning it.
Plan Your Future: Identify Your Goals and Make a Budget
What are your goals for five years, 10 years, 20 years from now: To buy your
own home? Send a child to college? It's important to define your goals, and
when you want to reach them.
Develop a Game Plan
In order to reach your goals, you need a plan. This plan is called a budget
. Don't be put off by the name. A budget is just a tool to help you get the
most from your money. It can be as simple or detailed as you like. Most people
do not factor in their major financial goals when developing their budget.
Instead they begin by writing down their monthly income, subtracting their
monthly spending and then deciding how to save or spend what's left over.
It might actually be smarter to first determine your goals and what it would
take to meet them, and then integrate those goals into your budget.
Here's how to get started.
Determine your Goals
Write down your top three major financial goals. These may include paying down
debt or saving for a house or your children's college.
Next, write down the expected total cost and time frame. Divide the cost by the
total number of months. This is how much you'll need to set aside each month to
reach your goals. (If the set-asides seem too big, you may want to extend your
time frame.)
To reach your goals, you'll need to set aside a certain amount each month. One
good method for doing this is to set aside your goal money first,
then cut back spending accordingly.
How much spending will you need to cut? Where will you cut? Or how much
additional income, if any, will you need to earn each month? The best way to
answer these questions is to do a budget.
Look at the Numbers
Now that you have determined your goals and the money you'll need to set aside
each month to meet them, as well as your monthly take-home income, you can
calculate the absolute maximum that you can afford to spend.
Plan Your Monthly Spending
This is where the magic happens. Once you begin to see your financial picture
more clearly, you'll begin to discover new and exciting solutions.
Stay on Track (By Following Your Budget)
Once you've made a budget, write down your spending each month to see if you're
on track. If you accidentally go over budget in one area, don't panic. Instead,
try to cut back in other areas so you can still come out on target.
Staying on top of your budget takes only a few hours a month. It may seem
awkward at first, but the more you do it the easier it gets. Rewards soon
follow. As your debts go down, your savings will increase. Best of all, you'll
live better by getting the most from your money.
Total Your Spending, and Compare
If your total monthly spending is more than your maximum spending limit, go
back and look for areas to trim. Keep cutting until your monthly spending falls
below the maximum, so there is money left over.
Set up an Emergency Fund
What you do with the small amount you have left over at the end of each month
will have an enormous impact on your finances. This is the only money, other
than the amount you've set aside for your goal, that you can use to improve
your financial situation. Consider using this money to improve your financial
situation by paying down your credit card and loan balances, or setting it
aside for an emergency fund.
Some of the money in your budget won't actually be spent every month. This
includes money you've budgeted for future car repairs, house repairs,
insurance, property taxes and medical and dental bills. Don't spend it. When
those big bills finally arrive, you won't be caught short.
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