If you’ve never had to budget before it can sometimes seem like an overwhelming task. There are all kinds of elaborate methods to create very exact budgets that track everything. For most of us, this is probably overkill and prevents us from getting to the task of actually saving money. To get started today you can do something very simple. Take all of your absolute necessary expenses. We’ll call these our fixed expenses. These are the things that we can’t stop paying without making some major life changes.
The next step is to list out your monthly income
Spouse Salary $2,000
Next you will need to think about how much you would like to save. You’ll need a cash buffer and to save for retirement. You may want to think about other goals such as your next car and whether or not you will save for your kids college education. This is the whole idea of pay yourself first. It represents a way to make sure you put your savings goal first.
The difference is then the amount you can spend on all the other things.
Obviously, you need to think about groceries, gas and everything else that you need day to day. I purposefully lump all of these items into one big general fund. Because they involve a large range of trade offs that you will need to think about. This is the opportunity to get creative.
You can think about what you truly value and use to make your life fulfilling. Personally, there is no way I could actually live without Internet access, but I could live without my NetFlix account. To save on gas I started carpooling and got a special fuel perks card. If I really want some purchase that I can’t afford perhaps I’ll find some coupons or cut back in other spots.
A great one we have started is cooking with our kids. We save money by not going out and our kids really enjoy it. I’m sure you can think of similar examples to help you cut back spending, but still enjoy life.
I’ve heard financial planning experts talk about cutting up credit cards and telling people to use a cash based system to manage their finances. I’ve typically thought didn’t apply to me. I always paid off my balance every month and had an excellent credit score. Recently, I wanted to tighten down how much my family spends on various purchases. We’ve always used credit cards for every day purchases, but the credit card bill tended to fluctuate every month based on the families desires. I’ve tried various mechanisms for tracking. I’ve said that we’re only going to spend X dollars a day etc. It seems there was always some special 1 time event or purchase that ended up on the card.
The problem is that the mental accounting the family had to do to stay on track just wasn’t working. Instead we switched to a complete cash based system. Each family member was given an envelope with a certain amount of cash for everything. If my wife finds bargains at the grocery store she can have a little extra the next time she goes to the beauty salon. If she decides she has to have that certain something at the grocery store and doesn’t have enough money for the salon then she will just have to live with a few of the grey hairs a little longer before her next color treatment.
After using the system for a month it has worked well for us and allowed us to stay on budget.
If you don’t currently own your the place you live in you may be missing out on one of the greatest opportunities in your life. Most of us are well aware that it is a buyers market and that homes are being sold dirt cheap. The other opportunity is the incredibly low prices on 30 year fixed mortgages. The last time they were even close was March of 2004 at 5.45%. If you look at the charts since 1971 this has rarely happenned and could truly be a once in a lifetime opportunity to have a low monthly payment on a loan. Even if you already have a home loan your payback period to refinance could be less than 2 years. The reason for that is you typically have to pay some fees to refinance your home. Let’s say you save $100 a month in mortgage payments by refinancing, but the fee is $2,400. Even with the lower payment it will take you 2 years to make up for the difference. If you plan on staying in your current home for more than 2 years it should certainly be considered. Over the next 30 years you would save $36,000.
Last night 20/20 featured an interesting segment on homes in foreclosure. They interviewed some urban pioneers in Michigan who are rebuilding an entire neighborhood one house at a time. The homes sold for $100-$500. They were in terrible shape. Most of them were either burned and partially destroyed. While it will probably take 10’s of thousands to repair them and the area is awful the pioneers were doing something very interesting. They were building a community. Instead of trying to go it alone they found other people that wanted to renovate this area. One by one they began attracting friends and family to come join them in their quest to rebuild this area.
I have no doubt that in ten years this will be some cool, hip part of Detroit that everyone wants to visit. An interesting example of creativity during a tough patch in our economy.
The LA Times recently featured a story on VA Loan Benefits. For military members coming home and looking to purchase a home there are some tremendous benefits. Without putting up any of their own money veterans can borrow up to 417k with a GI loan. The limits increase in other areas such as California and Colorado where home prices are higher than the rest of the nation. There are some pretty specific items you need in order to qualify
You will also need to show work history and ability to make payments for the loan you are applying for. Lastly, there are three other reasons these loans are good for veterans.
No PMI Insurance is required.
VA Loans require no money down and you will see no penalty rates
VA Loans have lower rates than conventional loans.
Given the current economic environment this is a great option for those who have dutifully served our country.
By Dr. Bonnie Eaker Weil
As we face an economic downturn unlike most of us have ever seen, what I call “breaking up” with your money can be an important step for your financial well-being, for your relationship, and for your sanity. We never know what the future may hold – things may start to get a lot better, or they may get worse – but creating healthy relationships with your finances and budget is something that will pay off no matter what type of financial situation we face as a nation or you face as an individual or couple.
The first step is to realize the areas in your relationship where money has “intruded” to create what i call a triangle. I discuss these areas in more detail in my book, Financial Infidelity, but here are some possible triangles, and how you can break up these patterns!
1. Family/Money/Relationship: Family legacies of money behaviors are not always contained in our subconscious minds – they can be very real! Demands of extended family members for financial support can be one way in which money can encroach and put a strain on a couples finances AND on their relationship.
2. Children/Money/Relationship: Nearly 70% of couples experience relationship stress after having kids. When a couple becomes contentious over spending on their children, the couple’s relationship can suffer – as can the family’s relationship.
3. Spending (or saving)/Money/Relationship: This can be a case of “opposites attract” in the extreme: the relationship then becomes at risk for damaging power struggles, sneaky “pay back,” and other deceit.
Hiding or denying the role money has in your life and in your relationship – as in any of the scenarios above, or other scenarios – has a toxic affect on a relationship. These types of “triangle” behaviors negatively influences your relationship with your partner. You may not think of it as cheating, but if you continue in this type of lop-sided relationship, it will take a toll. Attachment to your money can often ruin chances for you and your partner to build an intimate relationship.
Learning to prioritize the role of money in your relationship is an important step toward a healthy dynamic between your, your partner, and your money. I’ve come up with several ways to do this - here is one such exercise:
Withdrawals and Deposits:
Day 1: pretend you have suddenly been forced into bankruptcy. You are poor and have nothing – no money, no investments. Take your negative fantasies into the extreme – imagine yourself selling everything you have, being free of all your material goods.
Day 2: Visualize yourself with plenty of money, and all that entails. You are comfortable and able to do the things that are truly important to you.
Day 3 – and forever after: be consciously grateful. Each day, count the things you are grateful for.
Dr. Bonnie Eaker Weil (http://bonnieblog.significantauthors.com/) has been an internationally acclaimed relationship therapist for thirty years. New York magazine named her one of the city’s top therapists and Psychology Today named her one of America’s best therapists. Her most recent book, Financial Infidelity, is available on Amazon: http://www.amazon.com/Financial-Infidelity-Conquering-Relationship-Wrecker/dp/1594630453/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1217873178&sr=8-1
Watch her appearance on Jen and Barb Mom Life (JenandBarbMomLife.com), starting on March 5th, as she talks about issues affecting families and couples today. Join her Facebook group to keep up with events: http://www.facebook.com/group.php?gid=69563300615&ref=mf&nectar_impid=a328a6e23a72d33f318c4c51e1e44260&nectar_navimpid=a328a6e23a72d33f318c4c51e1e44260
One of my favorite financial sites is bankrate.com. When I was looking for a mortgage I scoured that site on a daily basis watching rates change and thinking about who I would place my mortgage with. Interestingly for me it wasn’t all about the best rate. I also wanted someone who wouldn’t sell my mortgage and who had an office close by. I was able to find it and get a decent rate easily. I am amazed at the difference between the advertised rate and the rate you end up with though.
Even though bankrate is the 800 lb gorilla in the market there are a growing list of sites specializing in financial niches as well.
Anyway, there is a new site that seeks to help Australians with their rates as well. The site is called GoodWithMoney. They compare traditional items like credit cards
and cheap loans, but what I also found interesting is that you can compare rates on items like insurance and broadband services. They have most of the major items that you need for your financial being on their site specifically geared to those living in Australia. They also have a section dedicated to financial Australian news.
If you have any other interesting sites that help to compare rates for a given niche let us know in a comment.
Living below your means doesn’t seem a desirable decision to survive today’s recession.
There are better ways, and although living below your means are the next logical step when you are in financial strain, your sense of achievement must be maintained.
Why is that?
In order to keep yourself on track in navigating through the economic storm, you need to stay focus. Staying focus can be achieved through the fulfillment of your need for achievement - and living below your mean is not the way to fulfill yours.
Living cheap is not living below your means. Living cheap means living within a closely controlled budget to achieve the living standard that anybody else has on a higher budget.
The main idea of living cheap, looking rich is to aim to get the best deal in every way, including clothing, entertainment, etc. in such a way that nobody would know that you spend less for the look you have right now.
‘Look’ here is not only clothing, accessories, or any other apparel and fashion related products - ‘look’ is your lifestyle, in a standard that can’t be achieved by living below your means.
‘Look’ is going to Starbucks occasionally, and socialise with your friends and colleagues. ‘Look’ is how people perceive of you, no matter you achieve ‘it’ by bootstrapping. You shouldn’t overdo them, though.
The key in living cheap is total control of your budget.
We live in a society that value physical appearance, lifestyle and charisma. Enhancing yours will actually help you land better job, secure more business, or socialise with more people (which can present you with more opportunities) - all in all will affect your bottom line: your personal finance, in a positive way.
You deal with people, and most of them don’t really care how much you make - what they care is what they see, and how they preceive of you. For example, in a meeting with business prospect, you need a professional look that commands confidence, charisma, and trustworthy. You don’t want to meet your future client in your t-shirt, don’t you.
There are ways you can consider to live cheap but look rich:
Remember, don’t live below your means - Live cheap, look rich. That is good for your economics and, in effect, your personal finance endeavour.
Image by net_efekt.
When we talk about loans in any forms, they are always related to debts.
Taking loans can offer you two things: good debts and bad debts - good debts put money in your pocket, bad debts lose money from your pocket.
Your financial needs, situation and knowledge play important roles in making the loan bad debt or good debt.
Loans come in many flavours - One of the most talk about, in my opinion, is payday loans. Why is that?
Payday loan is a small amount, short-term loan that is intended to cover borrower’s financial need until his/her next paycheck received.
With the advent of the Internet, payday loans are becoming more and more accessible. The term “faxless payday loan” refers to payday loan which application is processed online, thanks to the Internet.
While in essence payday loan aims to help people regardless of their credit score, many accuse payday loan as the culprit that drown many people deeper in debt.
In my opinion, people inherit a common weakness. They want more for less, and they want it fast.
People are always looking for fast and instant remedies for their problems, including financial problems. Just like everything in life, such as fast food, instant means immediate gratification first and quality second.
Payday loan offers fast solution. Faxless payday loan even does things faster, due to online application processing and instant approval. The drawback, as always, is the sky-high interest rate.
Those bring interesting relationship: No matter how negative the reputation of payday loan is, it seems that more and more people need payday loan these days, and payday loan providers are thriving these days. Some sort of love-hate relationship between lenders and borrowers.
I am appalled to know people are blaming payday loan. Although I’m not offering any payday loans or similar things and not involving in one either, I think there are too much bad apples thrown at lenders, accusing them as scammers.
Have you ever thought that it is borrower’s responsibility to keep him/her-self well-informed regarding what type of loans he/she is about to take? It is borrower’s responsibility to know what question to ask and when to take payday loans.
Many payday loan providers I know are trying hard to offer a solution. They bear huge risks - they lend to borrowers with no regard of their credit scores. That is why payday loans charge huge interest rate: to supplement the high risks of lending to borrowers with bad credit ratings.
The right borrowers do regard payday loans as the life-savers. do help people - the right one and the well-informed one, that is - getting out of debt.
First thing first - learn everything you can about payday loan. It is your responsibility to learn about payday loan, about the providers, and about what to expect and when.
Always plan everything - You need to know how much will you get from the lenders, the amount of the interest you owe to the lenders, and most importantly, how the short-term loans can help you getting out of debt, and for how long. You can actually ask the payday loan providers to provide you with a calculation on how much would you pay in the end of the loan period.
If the plan looks positive, go for it. If not, run away from it.
One, last advice: Never, ever take any form of loans without the right knowledge about the loans. That only makes payday loan quick sand, not helping hands.
Image by toolfan.hess.
One of the most common routes people take to tackle any negative financial issues is live cheap. This is a simple human behaviour. People tend to act cautiously, often in paranoid-like ways, whenever they hear negative issues, especially those that involve money.
As you might already know, the fall or stock markets worldwide is mainly caused by negative sentiment and outlook on the economy. This is a strong indicator that people these days are more sensitive to any movements in the economy, in a negative way - they are tend to be overreacted to negative news, and overly cautious to positive news.
Living cheap might hurt your ego and drown you in negativity even more. People do need a form of achievement in their life, and these days, maintaining their lifestyle is arguably the best achievement of all.
Living cheap might also worsen your state of personal finance. For example, if you ’skimp’ on your daily meal, you might get sick - you and I know that getting sick these days is the least thing you want to have.
Ultimately, you have to stay healthy and pumped up to face the current money problems and issues.
There are actually ways to live smart, not cheap today.
Retails hit hard in recession today. The logical action? They do prolong promotional campaigns and release coupon codes to keep consumers ‘near’.
You can easily access Money-saving Codes from many sites on the Net, that allows you to shop online and off line for less.
With the high season of Christmas nearing, you can expect more promo and discounts from retailers. Again, you can access Christmas Sale News from the Net to learn what kind of perks you can have from your favourite retailers.
With the rise of gas prices, traveling costs you considerable amount of money. You can invest in a scooter that consumes extremely less gallon per mile than any other motorised vehicles. If you also want to better your health, you should consider bicycle.
Related to smart shopping, not only promo codes, many retailers online can have your purchased items and goods to be delivered to the comfort of your home. This service will dramatically cut your traveling cost.
In everything you do to survive today’s recession, I suggest you to keep this words in mind:
Your health is your money.
Living cheap and in constant insecurity will eventually bring your health and morale down. They will definitely affect your personal finance, either now or later. So, take any benefits of today’s situation to maintain your physical and emotional welfare.
Image by timparkinson.
Which is cheaper, eating out or staying in? Common wisdom says eating in. Take this article, for example, in which the author conducted a fairly controlled experiment, eating out one week, cooking at home the next (with the potentially confounding factor of a wife eager to vindicate eating out). The results: the week of restaurant dinners was $257.08 and the week of (fancy) home-cooked meals was $148.14. Likewise, this post breaks down the cost of making the equivalent of a McDonald’s $1 cheeseburger–and finds that it is slightly cheaper to make your own.
On the other hand, there have been many attempts in recent years to show that eating out can be cheaper, or at least no more expensive, than eating in. For example, when you’ve got small children and go to the right restaurant, it can be a fairly economical proposition to go out instead of cooking–especially when you consider that you don’t have to do the dishes. And if you dislike cooking to the point where you feel the need to charge for your time spent cooking, then cooking is probably the more expensive option.
So which option is better? This question can’t be answered without an “it depends.” If you consider money alone, cooking at home is by far the better choice (especially if you don’t go in for things like aged parmesan cheese, or caviar, or steak three times a week). If you consider your time as too valuable to be spent cooking and charge anything over around $20 an hour–and you’re not cooking for many people–then the restaurant may be your best value. Personally, I enjoy cooking, so the time is not a factor for me; I even consider it a plus because I get to indulge in an activity that makes me happy. But if you despise cooking so much that you’d be living off of boxed kits and frozen pizzas if you ate at home, it may even be in your best interest health-wise to go out to a decent restaurant or a healthy carry-out place.
As in so many other aspects of personal finance, value is not as concrete as money, or time. The value you place on various things in your life will color your perceptions on what the best things to do with your money are. This can be important to remember when you’re considering your budget or your investment options–or your dinner choices. The frugal choice may not be the one that makes you happy; and unhappiness costs more than most of us can really afford.