Budget Tips

The Budget Tips that we will learn about on this page will help you to create a budget, stick to it as close as possible, and allow you to realize all the goals and dreams you set for yourself. Right about now you need to decide if you want to use a personal finance program like Quicken or Microsoft Money or one of the newest ones out there which is free, Mint.com. On the other hand, you could take out a plain white sheet of paper, draw a line down the middle and re-read page one of this section on budgets. Whichever method you choose, just keep a positive mental attitude, be truthful to yourself, set attainable goals and you will succeed. This entire exercise known as Budgeting and Budget Tips is simply a matter of seeing in writing where all your money is coming from and where it is going to or for. If you have any discipline at all, a sheet of paper should suffice. If you need more hand holding, consider budget software like mint.com.

If you recall from Budgets, pg.1, we need to list all our expenses on the right side starting with our fixed expenses, then moving on to our variable expenses, and then finishing with a miscellaneous category. If you are the type of person that uses the ATM all the time, it is important to keep track of what those withdrawls are being spent on so that they can be allocated to one of the many categories you set up on the right side. More than likely, it will take several revisions of your initial budget to get it down right. As the months progress, ongoing analysis will allow you to be able to decide if each category fits well in to the overall budget or if cutbacks are necessary in order to make the expense side come into allignment with the income side.

As mentioned on pg. 1 and in several other areas of this site, your budget needs to have an entry on the right side where you are paying yourself. Ideally this would be at least 10% of your gross pay and could be spread across a few categories such as a savings account or anyone of a number of retirement vehicles. If you find yourself funding this section with less than 10%, make it a point that all raises, bonuses, and other monies above what you are currently earning shall be devoted here first. As a matter of fact, if you get in the habit of placing all new money here and allowing it to compound, you might just be able to retire earlier than you think. I wish I had that budget tip in my early days. The only exception to this is if you are carrying credit card debt from month to month which typically has an interest component of 18% or higher. Paying this off is like earning 18% on your money instead of investing it at 8-10%. Your budget will thank you for it.

You have finished the exercise, added up your expenses, and suddenly realize that your monthly expenses are greater than your monthly net take home pay! No wonder you are having so much trouble paying the bills. Time to start cutting. Every line must be scrutinized to maximize savings and efficiencies. Even the fixed expenses that are seemingly out of your control can be addressed. Mortgages can be refinanced, taxes can be grieved, cars can be downsized. Under the variable expenses list, be on the lookout for entries that are "wants" and can be cut to the bone but heretofore have been misappropriately labeled as "needs". There are so many places to cut that if you can not figure out where the waste is, I will be more than happy to help you. Use the Contact Me tab on the left and we will take it from there. Some other budget tips that can be addressed as you are putting your budget together:

• If you have several different areas of debt such as mortgage, auto, credit cards, any extra cash should be applied to the area of highest interest rate first
• Consider switching your monthly mortgage payment to a bi-weekly payment. On a typical 30 year $300,000.00 mortgage you will save over $100,000.00 in interest and be paid off 7 years sooner
• Before you repair an appliance consider this: if the repair costs 50% or more than the cost of a new one or the appliance is 8 years old or older, replace it
• If you use credit cards, make sure your card offers points or miles or some other reward
• Be certain to set money aside for an emergency fund of 3-6 months worth of monthly expenses now that you know your monthly number
• The easiest way to not feel that you have to live up to the Jones's is to just say NO...do not give in to temptation
• Do not use a home equity loan as your personal piggy bank

Now that you have your budget up and running, you will want to check it often to be certain that you are staying on track. The last piece of the puzzle in making your budget is the actual monthly bill paying. You want to automate as much of this as possible. This will cut down on the drudgery of having to write a dozen or so checks every month. If you use personal finance software, you can click to pay which is kind of handy but I go one step further. On pg. 1, I mentioned that I use a neat little trick with my budgeting. Here it is...1)examine all your recurring monthly expenses, 2)have them all automatically post to the credit card of your choice, the one that gives you the best rewards, 3)then once a month, when that card's billing cycle closes, view the charges for approval and click to pay! No bill paying, no postage stamps and best of all, quick rewards buildup that includes all the things you would not normally get rewards for! Budget plus Rewards...what could be a better budget tip than that?

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