Tag Archives: how to live within your means

A Fresh Start for Family Finances in the New Year

While 40% to 50% of us make New Year’s resolutions on January 1 – a ritual that has existed since ancient times – approximately 60% to 80% of us have already broken them by the end of February, according to researchers.

It’s still not too late, however, to reset the trajectory on your family’s finances, experts note.

1. Build a Budget

If you haven’t already done so, create a realistic budget.

Approximately 85% of your income should be set aside for necessities like housing, food, health care and clothing, according to the professionals at VISA USA.

This leaves 15% for entertainment – and something many consumers completely neglect: savings.

2. Distinguish “Needs” from “Wants”

Make sure you have a clear understanding of what you need in life versus what you want in life.

You need to pay for the antibiotics when the doctor diagnoses a respiratory infection. You don’t need to buy the latest movie released on DVD to aid in your recovery.

You need to pay the rent or mortgage. You don’t need to buy the lovely accent pillows that beckon to you from the interior design boutique.

Always separate the needs from the wants – particularly if money is tight.

3. Monitor Your Spending

To see what you really spend each month, keep a running log of all purchases – no matter how small – for a full month. This will give you a visual display of where your money goes after you deposit your paycheck.

You may find that the $3 cup of coffee that starts each day adds up to $90 a month – a pocketbook pincher that may prompt you to buy a pound of coffee beans at the local market and grind them yourself. That $90 blossoms into $1,080 in savings at the end of a year.

4. Create an Emergency Fund

Life is full of surprises – both positive and negative. If you happen to lose your job or suffer an illness that temporarily sidelines you, you will need cash reserves to support you during the rough months.

“In most cases, consumers who find themselves dealing with a financial hardship are unprepared and have not saved for unexpected situations,” says Diane Giarratano, director of education for Novadebt, a U.S. financial management service agency, with multiple locations, that provides credit counseling, budgeting and financial education.

5. Educate Yourself

When you attended high school or college, you studied history, mathematics, language and science, but there was probably no course in basic money management.

If you need help in meeting a financial goal – whether it’s buying a home or reducing your debt – take advantage of community resources.

“Consumers should feel free to contact a good credit-counseling agency to obtain free advice with regard to establishing a budget or to learn how to handle unexpected hardships,” Giarratano says.

6. Don’t Become a Victim

Identity theft has become an international epidemic, so be extremely cautious when giving out  your credit card or personal identifying information. Monitor your credit card bills carefully
for unauthorized charges, and immediately report suspicious activity to the issuing company.

“Identity theft is often an inside job,” warns Robert L. Siciliano, a personal security expert with Boston, Massachusetts-based SafetyMinute Seminars and author of “The Safety Minute.”

“Lower-level help desk workers and frontline call center employees often have access to all our personal information in their databases,” he says. “What are you doing to protect yourself? If you’re not paying attention, you could be a victim, too.”

And when a disaster strikes, such as the recent killer tsunamis in South Asia and East Africa, be wary of scammers from fake charities before reaching for your checkbook. Unfortunately, there will always be unscrupulous individuals who seize such opportunities to profit from others’ misfortune.

“Avoid using your credit card to make contributions,” advises James Walsh, author of “You Can’t Cheat An Honest Man: How Ponzi Schemes and Pyramid Frauds Work…and Why They’re More Common Than Ever.”

“Even though this can be a convenient way to proceed, many crooks are looking for credit card numbers,” Walsh says. “They will press strongly for ‘immediate support.’ Don’t rush.”

Instead, initiate the call yourself, and select a reputable charity.

“Go with recognized names,” Walsh says. “No organization is perfect; even the best-meaning groups occasionally misallocate money or fall victim to abusive employees. But larger charitable
groups – like the Red Cross, the United Way and Catholic Charities – have the mechanisms in place to audit their people and performance.”

Charitable contributions are tax-deductible, so keep good records of all donations – including small cash gifts.

ABOUT THE AUTHOR: Fox Symes assists all Australians discover the truth about their debts and how they can rapidly reduce them. There are methods available to the Australian public and you can discover how to use these to assist you in reducing your debt with a free phone consultation from Fox Symes. Visit http://www.foxsymes.com.au

Living on What’s Left

Are you one of those people that pay your bills no matter what? That is an admirable trait to have when managing your money. You made the bill and you feel you are responsible for paying it. Good for you.

Now let’s talk about how much money you have to cover your household expenses after you pay all of those bills. Your household expenses would include your groceries, car gas, school lunches, and all of the other stuff that it takes to run a household. Do you have enough to pay this bill?

All to often, people tend to pay their bills and try to live on what’s left. This never works unless you have enough money left to cover these at home expenses. The grocery bill will always run about the same, you will always need about the same money for gas, etc. In other words, you need enough to live on.

I have seen this time and time again. Another bill is made and the money comes out of the household budget because there is no money available in any other category. Then what happens?

Many people resort to using their credit cards to cover their regular expenses. Since there is no other money available to pay their increased credit card payments, that also has to come out of their household expenses. This is how many people find themselves in over their heads.

There is only one way to change this cycle. You have to allow enough money in your budget to cover the things you need. You must do this even at the expense of your other bills. That could put you in a position that you can’t make some of your payments, but at least  you won’t be increasing your debt, except for possibly late fees. If this is your situation you need to seek help to reduce the payments on your other bills.

Naturally, there are many ways to cut your household expenses that will allow you to pay more toward your other bills. You can save a lot of money on groceries by using coupons, buying generic, not using processed foods, etc. The internet is full of ideas and tips to help you save. I would start by visiting The Frugal Shopper at http://www.thefrugalshopper.com.

When you develop or revise your budget, always put the emphasis on your household needs. Once you have determined how much you need to get by, then you can see what is left for other bills.

Terry Rigg is the author of Living Within Your Means – The Easy Way and editor of The FREE Budget Stretcher Newsletter and Budget Stretcher web site . He has 25 years of experience counseling individuals and families concerning their personal finances