Today’s economic climate makes it hard for everyone to make ends meet. One of the major reasons is that most families have never learned about budgeting. As long as they continued to draw an income, budgeting was something that belonged to the poor.
The reality of today makes it critical to know where money comes from and where it goes. Few people can afford to let slip a few expenses as those expenses add up quickly to eventual financial ruin. While budgeting is something few people have the heart to do, it can be easy to set one up, so long as you keep in mind a few points.
The Right Budget
A budget is a reality check of your current financial situation. You can’t work a budget unless you put down every expense and every dollar you earn. While you may know how much you earn, you can’t base a budget on the assumption that you will always earn a salary tomorrow. While constructing your budget, stay true to yourself. Base your budget on today’s reality and not future fantasy.
A Reason to Save
It’s easy to spend to satisfy selfish needs. But if you’re unmarried or are a family man, you need an overwhelming reason to save dollars. You can, for example, get the latest appliance at the expense of your children’s education. It’s a matter of priority. Your children’s education can stimulate you to save, while your appliances will wear out long before the kids set foot in the halls of higher learning.
Switch to a Cash Basis
Credit card purchases can put you into a severe financial hole. While interest rates on savings are non existent, credit card interest rates have not moved down in accordance with the economy. This makes it imperative that you switch to a cash only basis. Pay for items in cash or use a debit card. You can’t spend more than what’s in your bank account.
Be a Frugal Shopper
Today’s economic climate demands that you look for bargains hidden in those fliers, magazines and newspaper inserts. With food and fuel prices headed upward, you can’t afford leisure spending at the supermarket. Like the eyes of an eagle, you need to be on the lookout for any ways to shave off some nickels and dimes.
Create an Emergency Fund
When trouble strikes, many families pay for their emergencies with credit cards. Today’s world requires you to have an emergency fund in case a layoff occurs or the car breaks down. An illness in the family can be a great strain on any family budget. After you’ve apportioned you necessary expenses, savings and investment, put some money into a fund before you consider spending the rest. You won’t be shocked when it comes to paying for those emergencies.
Christmas bonuses, pay raises, tax rebates and inheritance money give people the excuse to spend more. They lose sight of their budget and go on spending sprees. But a budget exists to build discipline. Extra bonuses and windfalls shouldn’t provide the excuses to throw away your budget. You can, of course, celebrate within reason, but you should stick with the same lifestyle you had before the windfall arrived.
Review and Readjust
There’s nothing as sure as change. Once a month you may need to review your budget and make corrections to anything that creates undue hardship. Today’s budget may work in today’s economic environment, but tomorrow things may tear apart that carefully constructed budget. Your job, then, should be to be flexible with an eye toward saving.
If you follow these rules, you are more likely to survive today’s poor economic climate until a new utopia of reason and financial responsibility arrives.