Deciding to Keep a Budget
By Diane St.James
Most of my 22 years in the 'work force' have been spent in this
wonderful world of mortgages. But there was a period of time when my first
daughter was 3, that I worked for a Financial Planning firm about 45 minutes
from my home. What can I say? All the good jobs were Not close by. By observing
the financial planners in their meetings and through my own education in
business and finance, I've come up with a few suggestions for people on how to
manage money better.
DECIDE TO START A BUDGET First of all, I highly believe in a
budget! Do I follow it all the time? Wait...while I blow the dust off of my
"Monthly Household Budget" book. Well, I didn't say I always practice what I
preach, but if you can write down a budget and stick with it, that will help.
START KEEPING TRACK First you'll want to keep track of all your
spending for a few months to see just what you spend money on. Keep a little
notepad with you if you need to, so you know where it all goes. Little
incidentals like that pack of gum, deodorant, and oooh...don't have that new
copy of People magazine yet, can be put into a miscellaneous category. Depending
on how many categories you have, by the end of the month, this miscellaneous
total may be your biggest! <grin>. The monthly household budget books that you
can find at any store like Kmart, work well, or if you are computer savvy and
want to keep it on a spreadsheet type of program, you can do that. Write your
expenses in the appropriate column and don't forget to write your income down
ANALYSIS AND DISCOVERY Once you have a few months of income and
expenses written down, take a look at it. Look at it again! Are you spending
more than you are making? Join the crowd! How is this possible? Maybe the credit
card is being used a little too often, or you are dipping into savings to get
the lawn furniture that is on a special pre season sale. Don't go blaming
yourself entirely (although changing it is up to you). We live in a world of
instant gratification which is hard to resist.
LOOK AT CUTTING BACK Look at areas that you can spend less
money. Of course things such as rent or mortgage payments, car loans and
installment loans that will be there every month, you can't change. Utilities
you will have to average, because the amount you spend will vary each month
unless you are on a budget payment plan like some utility companies offer. You
can certainly save on utilities. Have you ever seen that commercial where the
mom follows the kid around the house, turning everything off after the kid had
turned everything on and left the room? You can turn things off that you don't
use. Are you forgetful? Get a timer! Take showers instead of baths. In fact,
take shorter showers...you get the picture.
CONSOLIDATE DEBT See how much you spend in credit card payments.
How many different ones do you pay on? If it is more than a few here is a
suggestion. Don't keep making the minimum payment on several different cards
each month. They will each continue to add finance charges, and you are also
spending more in postage (unless you pay electronically or via phone). Also
having several open charge cards with balances on them (especially if they are
close to the limit), will affect your credit score which is one of the main
things reviewed when getting a mortgage.
Look at the credit cards bills you currently have. See which
ones have the lowest APR (annual percentage rate as well as have the highest
credit limit. Many offer transfer balance services also at introductory lower
rates for up to 6 months. I would recommend consolidating all of your credit
card balances into two or three credit accounts. And then don't use these credit
cards unless absolutely necessary. If you have a lot of open credit card
accounts, close a few. This may bring your credit score up as well and help you
resist the temptation to use them.
I myself had some credit issues a few years back and transferred
all my department store balances into one Visa and one MasterCard account. Sure
the balances on these were now high, but there were only 2 credit card payments
due each month. The minimum payment was more, but I could pay more because I
wasn't trying to split the money between 10 accounts. Then I tried to add an
extra $20/month to my payment and not use these credit cards either. My balance
started to come down by more than a couple dollars each month. It can work! I
also saved on postage. Today if you mail payments on 10 separate credit cards
each month, that is $3.70 in postage. Sending 2 payments is .74 cents. So you
save nearly $3.00 in postage. It may only be $2.96, but it adds up each month.
In a year's time it equates to $35.52 in savings!
SHOP SMART See what things you may have bought that weren't
really needed. Shop smarter. If there is something on sale that you use a lot,
stock up while its on sale. Then you don't have to buy it the next few times you
are at the store. Try using coupons when you can, many stores double them. Do
you eat out a few times a week or more? Try doing it less. Pack a lunch for work
more often, instead of using those vending machines or worse yet going out to
lunch. I think you get the idea. I'm not saying don't enjoy life, just try to
keep a rein on where the money goes.
KEEPING THE BUDGET Once you have a budget with the amount you'd
like to stick to each month in each category, try to keep within those limits.
It doesn't hurt to put a little in savings each month too, if you can, but the
first thing to do is pay off any credit card debts that you have. If you can
stick to this plan and follow your budget you will have a better grasp on your
finances and be able to stop wondering where all the money goes!
Diane St. James is a mortgage professional with over 22 years experience.
Her website http://www.abcmortgage.net
exists to help educate people about the mortgage world. She is the author
of 2 e-books, and has been quoted in the WALL STREET JOURNAL, on msn.com and
appeared on national cable new television CNBC.