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family budgets

Why Should We Stick to a Budget?

April 12, 2009

in Personal Finance

The simple answer to this question is this: If you didn’t stick to a budget, you would have no way of knowing how much you spend or, for that matter, overspend. At the end of the year you would probably be scratching your head trying to figure out where all the money went to.

Family budgets are important because they not only track your spending habits, but allow you to make adjustments when you fall short each month.

Budgets require discipline. Statistics show that 60% of households stop budgeting after two months because they grow tired recording every single purchase and/or keeping the budget in check.

One budgeter offers this suggestion: Pay yourself first, and then budget the rest. This is an interesting concept. It may, in fact, be the catalyst that encourages you to live within the budget you have set for the family.

Instead of waiting until the end of the month to put aside money for your needs, you can set a specific amount from the get-go and then wrestle with how you will manage the household bills with the money that is left.

This is not to say that you should take a big chunk out of the budget first. It will require that you track your spending habits for about three months. In this way, you can determine what items you buy, how much you spend, and what can be eliminated.

Another woman has a different way of budgeting. The first year, she put every single receipt she had into a box. This included credit card bills, insurance, telephone, cable, car payments, payments to doctors, pharmacists, groceries, clothing ? no matter what she spent; every receipt was saved.

At the end of the year, she took the box and sorted all of the receipts into categories. She then made a list of expenditures. It was from these outgoing expenses that she was able to put together a reasonable budget based on her income.
Subsequently, she still sorts through the receipts every year to ensure that her budget is on track. If any tweaking needs to be done, it is done. But the bottom line is that if you know how much you spend ? no matter what the purchase ? it can make all the difference in creating a realistic budget you can live with.

Moreover, this process allows her to accurately give her accountant all her expenses for the year. It makes tax preparation that much easier.

If you have a family budget that you have not kept up with, now is the time to take out the books and the receipts and get to work. With the economy in the worst shape since the Great Depression, it is important to record every dollar you spend as well as every dollar you can save.

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Tips for Paying Off Credit Card Debt

April 10, 2009

in Personal Finance

Experts will tell you that the best way to pay off credit card debt is to make a list of your credit cards with the highest interest rates cards first. Then, for the card at the top of the list, pay off as much as possible each month instead of making the minimum payment.

When that card is paid off, move on to the next high interest rate card and follow the same procedure. This is known as the “snowball” process.

Of course, if you choose to pay off credit cards with smaller balances, that’s fine too. But those high interest rate credit cards can keep you in debt for years and years.

Here’s an example. According to Bankrate, “Paying just the $60 minimum payment on a $3,000 credit card balance would take eight years to pay off and cost a person a whopping $2,780 in interest. By paying an additional $50 a month, the debt would be paid off in three years and they would be spared $1,800 in interest charges.”

In today’s economy, this may seem a daunting task. However, considering that the unemployment rate is rising, more home foreclosures are expected, and not only banks but corporations are facing major financial problems, it is important to have the least amount of debt possible.

Will it be easy? No, it will not. Sacrifices will probably have to be made. Family budgets will have to be addressed once again to determine where additional funds can be put toward credit card debt.

In addition, in order to save money to pay off the debt, Bankrate advises that you follow these recommendations:

* “Brown bag ten lunches per month
* Have movies and popcorn at home instead of going out
* Use coupons for groceries and buy store brands
* Make pizza at home instead of ordering out
* Buy in bulk and freeze dinner entrees
* Give handmade cards and gifts
* Shop at consignment, thrift and discount stores”

There are additional measures you can take to increase the amount of money you save each month, including:

* Becoming more energy efficient
* Bundle the cable, phone, and internet
* Call credit card companies to have interest rates lowered
* Eliminate magazine and newspaper subscriptions
* Eliminate unneeded telephone services
* Increase insurance coverage

Anything you can do to begin to pay off your credit card debt will only serve to help you in the coming months and years. Most economists assert that the economy will only get worse before it gets better. It is incumbent upon you to be prepared for any eventuality, including setting aside money for any emergency that may occur.

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