Are You Afraid of a Budget?

Many people cringe or experience fear when they hear the word "budget". Many Americans feel the word is too restrictive and means they won't be able to enjoy life. Some Americans feel more at ease when the word "budget" is replaced with the word "spending plan", "financial plan" or some other term.

Many Americans today don't have a savings account. Many of us have good intentions and start out creating a budget but after a few weeks or a few months pick up the old habits and start spending and charging again. A budget is your friend. It is there to help you when you need it; it is not your enemy.

Having a budget is your safety net if you get sick or lose your job you can use your savings to hold you for a few months until you can find a new job. Your savings account should be separate from your checking, investment or money market accounts and should only be used for emergencies such as an unexpected expense, unemployment, medical bills, etc.

You can have multiple savings accounts, for example, if you want to save money to go on a vacation you can create a vacation savings account but you should always have at least one savings account dedicated for emergencies and unexpected expenses.

A savings should have enough money in it to pay your bills for at least 9 to 12 months. Your savings account money should be readily accessible and stored in an account, preferably a high interest savings account such as Emigrant Direct, HSBC, ING or a money market account where you can make money while saving money. Here are 9tips to help you overcome the fear of creating a budget.

1. Admit that you have a problem. The first step to changing your spending habits is to admit that something is wrong. Then develop a plan to improve your spending habits. Start off small.

2. Take accountability for your actions. Don't blame others for your financial situation.

3. You have to know where you are before you can get to where you want to go. You have to determine your SEO – what you spend, what you earn and what you owe. You can't improve your financial horizon or plan for the future until you know where you are at the present time.

4. Use pen and paper, use a software tool like Quicken or Microsoft Money or use the envelope method. Once you visually see where you are spending your money it will make it easier to reduce spending.

5. Write down a list of at least 5 financial goals. If you cannot achieve any or can only achieve 1 or 2 of your financial goals you need to make some changes in your spending habits. Write down a list of all of your debts. Develop an action plan and beside each debt write down steps on how you can pay the debt off: reduce spending, use coupons, use money savings tips, earn extra income, etc.

6. Pay off small bills first. Pay down any small bills and debt first. Once all your small bills have been paid off start tackling the larger bills. Setup payment plans for bills you cannot pay off in full. Be sure the account balances are updated on your credit report.

7. Surround yourself with at least three people who are doing better financially and gain financial advice from them.

8. Don't make the same mistakes. Insanity is making the same mistake over and over again and expecting a different result – don't be financially insane.

9. Seek professional help. Consult a financial coach, financial planner or advisor to help you create a budget or spending plan and provide recommendations to help you stay on track.

Common Budget Questions Answered

What's the most important thing you need to know about creating a budget?

Make your budget flexible. Some people make their budget too rigid and find it difficult to follow. Adding some wiggle room in your budget will make it easier to follow and make it easier to include savings in your budget and other financial goals, i.e. retirement planning, 529 plan, etc.

What are 3 tips for getting your budget back on track?

1. Write down the 3 reasons why you did not stick to your budget. Examining the reasons why you didn't stick to your budget will help you to resolve those issues and make it easier to begin using a budget.

2. Create a daily or weekly budget, get a receipt for everything you spend money on and log your receipts in your budget. You can use pen or paper or a software tool such as Quicken or Microsoft Money. You can keep all of your receipts in a shoebox, a plastic bag, and an envelope or desk drawer. This will help you to see quickly where your money is being spent and if you are spending too much money in one particular area, i.e. clothing, eating out, etc.

3. Use automatic paycheck deduction or free online bill payment to pay your bills. Using online bill payment helps you keep an accurate record of your spending. It can also help you to buy more needs (necessary items – food, non-designer clothing, shelter) instead of wants. It makes it easier to stick to a budget by using online bill payment or paycheck deduction because it you can't see the money it makes it less tempting to spend it.

What is one reason people don't stick to their budget?

A common reason people do not stick to their budgets is many people create a budget or spending plan but after a few weeks or a few months stop following it because you have to first admit that you need to change your spending habits. Having a budget requires discipline and provides accountability.

Is Your Car a Clunker

The Cash for Clunkers, Clunkers or the official name Cash Allowance Rebate System (CARS) program was signed by President Obama in June and began on July 27, 2009. Vehicles purchased after July 1, 2009 are eligible for refund vouchers worth $3,500 to $4,500 on traded-in cars with a fuel economy rating of 18 miles per gallon or less (fuel-efficient). The program will expire on Nov. 1, 2009.

Details of the program were mapped out by the National Highway Traffic Safety Administration (NHTSA). Unfortunately, interest in the Clunkers program peaked on July 29, 2009, and demand has stalled according to a report from Edmunds.com. The report which discussed internet shopping data said if current trends continue auto purchases will fall back to pre-Cash for Clunker levels by August 20, 2009. The report also predicted auto sales will improve over the summer as customers shop for bargains before the new car models hit the showroom.

Many people are show interest in purchasing a new car but do not qualify for the rebates which are affecting car sales. The White House hopes the rebates will increase vehicle sales which are down 3-6 million from 2007 and 2008 sales.

Approximately 16,000 auto dealers signed up to participate in the program. A government hotline was setup and has handled over 45,000 calls from people seeking information. A website for the program http://www.cashforclunkers.com/index.htm has registered 1.5 million hits since August 7, 2009.

Some dealers said junkyards in their area are not prepared to handle the inventory of older cars expected to be scrapped. Other dealers said the 136-page instruction manual provided by the government is confusing. Some car buyers have been disappointed that their cars don't qualify for the program.

Reduce Spending or Downsize

Due to the recession many people have been forced to or voluntarily made adjustments to their lifestyle due to loss of income, unemployment, reduced hours, reduced benefits, etc. However, many others are still struggling with making changes to their lifestyle. Many Americans are stubborn and want a different result but refuse to make the necessary sacrifices required to survive the recession.

If you don't much money left over after you get paid you may need to reduce expenses and spending. Everyone should reduce spending no matter what your situation to ensure you live well below your means so that if a financial crisis occurs you can overcome it without having to make drastic changes.

It is better to reduce spending because it is much easier to scale back by making small adjustments to your life than to make drastic changes. People are better able to adjust to small changes than having to make drastic changes to their lifestyles.

You don't have to sacrifice quality just because you reduced spending. There are many discount and outlets stores that sell the same things that department stores sell at a much lower price. Also, you can shop at discount or wholesale stores to purchase groceries instead of the regular grocery stores. This can save you tons of money and you can still enjoy the same quality of life.

You should downsize:
1) if you were previously a two-income household and you are now a one-income and you have been unemployed for 2 months or more

2)if you are behind 2 months or more on your mortgage, car payment, utilities

3)if you owe late fees on all of your credit cards

4) if you owe so much in late fees or over-the-limit fees on your credit cards that you will never get caught up by just sending in the minimum monthly payment or are unable to make the minimum monthly payments

You should save at least 10% of your monthly income towards savings. If you are not currently saving you can start by saving at least $1 a day or $1 a week. If you can save more than do so. It may take a while and you may not feel it is worth the effort but after a few months you will have a savings account which helps to provide motivation for you to continue to save.

Put your money in a high interest online savings account and you will earn interest at a faster rate than putting your money in a traditional bank. You can then move your money to more long-term savings products.

Are We Really in a Recession

I went to a few events this weekend and kept asking myself, are we really in a recession. In a recession how are people supposed to act. Should they live on a budget, stay at home all the time, only go out for special occasions, cut back on a few items, or live like there is no tomorrow and worry about the consequences later.

This weekend I saw many people spending lots of money and wondered, can they really afford to spend that money or are did they just get caught up in the frenzy of the 4th of July holiday and advertiser sales. How will they feel when reality hits and they receive that credit card bill or when they go to work on Monday and don't have any money to get to work or pay that unexpected bill that comes in the mail next week. These are just some of the things I pondered while I was out.

All of my friends and family know I am frugal, not cheap, I like nice things but if I can buy something at a cheaper price why not? I don't spend too much money on myself during the week, just $1.59 for grits Monday through Friday which equals to about $7.95 a week.

I also got caught up in the revelry and while out with several friends picked up the tab, not to show off, but merely as a kind gesture to those who have supported me with my business and who continue to support me and because I am blessed. I felt good knowing that because I live on a budget, only have my mortgage payment, my car is paid for, have a savings account and a retirement account I can at any time splurge on anything I choose because I live well below my means. I don't have to panic because when I receive my credit card statement because whatever charges are on there I can pay them off. I won't cringe on Monday morning because I still have money in my pocket and I don't have creditors calling my house harassing me.

I also have health, life and disability insurance which helps if you get sick or are unable to work for an extended period of time due to illness. This eases the burden of the high costs of medical care and ensures that you don't go into debt due to illness and prevents you from filing for bankruptcy due to high medical costs.

I hope everyone enjoys this holiday weekend. I wonder how you will you feel on Monday - depressed because you spent all of next week's money this weekend or will you feel happy because you are aware of your reality and spent your money wisely this weekend.

5 Ways to Make Your Money Last

Forty-percent of Americans live above their means. Seventy percent of Americans live paycheck to paycheck. Hopefully the recession has taught Americans a valuable lesson – you have to live below your means and plan for the future. Many Americans spend their entire paycheck within a week of being paid. Other Americans are financially immature and buy whatever they want and think about the consequences later. The only way to survive the recession and survive any future financial crisis is to change your spending habits. Here are 6 ways to make your money last.

1. Reduce. Reduce your expenses and live below your means. Buy more needs vs. wants. Don't buy something if you can't afford it or if you can't pay off the credit card balance within 3 to 6 months. Save your money to buy the item later or use lay-a-way.

2. Budget. Stop using your credit cards and pay cash for everything. If you do not have enough money to pay for necessary expenses such as food, clothing, shelter, healthcare create a budget for yourself to determine your total monthly expenses and your total monthly income. Reevaluate your spending habits. Shop at discount stores, outlets, use coupons, carpool, etc. to find extra money which can be used to pay down debt.

3. Direct deposit. Stop cashing checks. Cashing checks at a check-cashing store costs on average anywhere from 1% to 5% of the amount of the check. If you do this each payday this is money that you giving away and could be using. Use direct deposit for free and save yourself some money.

4. Savings. You should have enough money saved to pay at least 6-9 months worth of bills. Open a high interest online savings account such as Emigrant Direct or the ING Orange Account which earns you on average 2 to 3% interest on your money. Then develop long-term savings goals such as planning for retirement, college education, homeownership, etc.

5. Seek Help. Talk to friends, relatives or neighbors who have gone through similar situations. Go to the library or do research on the internet for various ways to reduce expenses, gain new skills, and shop on a budget. Some great websites are Budget Dial or The Stretcher. Some grocery stores such as Whole Food teach classes on how to shop on a budget.

If you want to make your money stretch you have to change your mindset. Watch financial shows on television or check out books at the library on personal finance, financial empowerment and other topics to help make your money last longer.

Should You Lease

Some businesses are losing sales and are considering filing for bankruptcy or dissolving their business due to the recession. However, many businesses are thriving with increased sales and taking advantage of consumers needs. One such example is companies that provide rent-to-own merchandise.

Many of these companies are doing more advertisements to attract customers. Aaron's has 1,575 stores and had 1st Quarter 2009 sales of 474 million. Rent-A-Center also known as Rentway had 1st Quarter 2009 sales of 728.2 million. Just think if half of those customers changed their lifestyle and their spending habits and paid down their debt which helps to increase your credit score, that money could be used to start a savings account, start a retirement account, purchase a home or more importantly buy items with cash. Instead of going to a rent-a-center store to buy a tv you could go to Best Buy, comparison shop online at Amazon.com or go to a thrift store to get a good deal.

Many rent-a-center stores know how to find their customers and customize advertisements to attract the customers they are looking for. Managers sometimes attend local events with customers to help them determine if a customer has lost their jobs. Some stores also ask for references to determine if the customer will make their monthly payments. Some managers attend their customer's churches, get to know their customer's backgrounds, talk to their employers or ask about their financial status. All of this information is used to help make a sale and ensure that customers can continue to make their monthly payments.

Purchasing items from rent-a-center store can cost you 2 to 3 times the original cost of the item and in some cases the items are used or could be damaged. You can prevent all of this by only buying items that you can afford. Here are 5 ways to help find the best deal without having to lease a purchase.

1. Research. Do research on the item you wish to purchase. If you are looking for a tv, look for customer reviews or ask family or friends what brand they purchased and if they are happy with their purchase. Use that information to help find a brand the meets your requirements so you are able to make a wise purchase based on quality not merely on price.

2. Compare. Do comparison shopping at different stores – thrift stores, outlet stores, discounts stores or online. Spend at least 20 minutes comparison shopping. For every 5-10 minutes spent comparison shopping you save $1-$9. You can also buy used items to save money.

3. Buy Later. If you see something you want to buy but don't have the cash or have bad credit, save your money and then go purchase the item. If you absolutely have to have the item when you see it wait a few days, then go back to the store. See if the item is marked down or ask a sales clerk when the item will go on sale. Then compare that price with other stores to get the best deal.

4. Use competitors. Go to a store and comparison shop. Then go to a competitor store and tell them you found a cheaper price at their competitors store and ask them to match that price or offer a lower price. Some stores do this such as the Room Store, Target, Wal-Mart, etc. See which store gives you the best deal.

5. Needs vs. wants. You should buy more needs instead of wants. There should be a balance, if you are buying more items that you want then reevaluate your spending habits. Only buy items that you can pay cash for or that are within your budget. That designer purse or designer pair of jeans is not a need. The only 3 basic needs are food, clothing and shelter, and I'm adding a 4th - one prescriptions.

Used is the new "new" and "new" is the new "old".

What Did You Buy Today - A Need or a Want

Advertisers make consumers believe anything can be bought instantly with the swipe of a credit card and lure consumers into store with false advertisements, sales and other gimmicks to buy things they can't afford or simply don't need. Most Americans buy more of things they want instead of more of things they need which leads to bad credit, late fees, bad spending habits, maxed out credit cards and filing for bankruptcy.

A need is something you have to have to survive – food, clothing (non-designer and shelter). A want is everything else, something you would like to have but don't really need. Create a list of things you buy and identify each item as a need or want. If you have more wants in your list then you need to change your spending habits and buy less of the items in the want column. Here are 5 tips to consider when shopping to help think in terms of needs vs. wants.

1. Do you convince yourself that the item you purchased is a need when it really is something you want?
2. Do you rationalize that you work hard everyday and deserve nice things and you should be able to buy whatever you want?
3. Do you buy an item with your credit card even though you know you don't have the money to pay the credit card bill when it arrives?
4. Do you go shopping with a credit card or with cash?
5. Do you buy more of things you want instead of things you need?

Buying more wants than needs can cause you to live above your means and leads to bad spending habits. Now is the time to develop good spending habits and reduce money spent on things you want. Buying wants should be done in moderation and only when you have the cash to buy the item. This will also help you to have a balanced budget. So, the next time you go into a store and pick up an item to buy ask yourself – is this a need or a want?

Your New Best Friend - A Budget

Many people don't know how to create a budget or spending plan and don’t know where to start. The first step to getting out of debt is by creating a budget. Creating a budget shows accountability for your spending and shows you how much you have coming in and how much you have going out. It identifies your SEO – what you spend, what you earn, and what you owe.

Make your budget flexible so you have "wiggle" room for unexpected expenses. If you don't have an emergency fund or savings to cover those unexpected expenses you can see right away what areas in your budget you need to reduce spending instead of using a credit card to pay for those unexpected expenses. Most people don't think about how much money they spend per week or per month but when you see all of your expenses written down it provides greater insight into your spending habits.

The first step is to determine if there are some areas where you are spending too much money, you want to have a balanced budget and make sure you don't spend too much money in any one area of your budget. Develop financial goals for yourself when creating your budget. Financial goals encourage you to work towards reaching that goal and provides a sense of accomplishment when the goal is met. Some examples of financial goals are: pay off a credit card, buy a home, take a vacation, etc.

Being debt free is hard work, requires discipline and reduces your anxiety and stress about your financial situation. Many things are possible when you are debt free and live on a budget. Determine if you want to live the rest of your life as a borrower or as a lender. It's up to you!

Live Below Your Means

Americans are living above their means, drowning in debt and the problem is getting worse. Many Americans spend their entire paycheck the same day or within a week of being paid. Many Americans live above their means, are in debt and have no savings. Here are 5 ways to stop living paycheck to paycheck:

1. Direct Deposit. Cashing checks at a check-cashing store costs on average 1% to 5% the amount of the check. Use direct deposit for free and save yourself some money.

2. Education. Further your education or take training classes to expand your skills at your current job. This will put you in a better position to get a promotion at work or salary increase. That money can be used to create a savings account, plan for retirement or pay down debts.

3. Budget. Stop using your credit cards and pay for everything with cash. If you don't have enough money to pay for expenses create a budget for yourself to determine your total monthly expenses and total monthly income and reduce your expenses (i.e. cable, cell phone, internet, etc.). Shop at discount stores, use coupons or carpool to find extra money which can be used to pay down debt.

4. Savings. You should have enough money saved to pay at least 3 to 6 months worth of bills. Open a high interest online savings account such as emigrantdirect.com or ing.com. Then develop long-term savings goals such as planning for retirement or homeownership.

5. Seek Help. Talk to friends, relatives or neighbors who have gone through similar situations. Go to the library to research various ways to reduce expenses. Many groceries stores teach classes on how to shop on a budget.

If you want to stop living paycheck to paycheck you have to change your thinking and see yourself being debt free.

6 Ways to Recession Proof Your Income

The Federal Reserve has dropped interest rates 2.25% points since August 2007. There were approximately 700,000 foreclosure filings in 2008. Congress is trying to combat the recession by giving Americans tax rebates. Oil prices are over $120 a barrel and gas is $4 or more a gallon. Food prices rose more than 4% from last year. With the high cost of gas, food, housing, utilities and travel costs you have to develop a plan to ensure you can sustain yourself through the current recession. Here are 6 ways to ensure you survive the recession.

1. Find stable employment – Many companies are having layoffs or reducing salaries or employee hours. To protect yourself, if you are a contractor or a seasonal employee try to find a stable job or get a part-time job to get additional income. Do research on a company to see their annual finance report, see what the company's plans are for the future and ask others if they have heard about the company to ensure you are working with a stable company. If you hear rumors of layoffs dust off that resume and start looking for a new job.

2. Reevaluate your finances – If you don't have health, life or disability insurance consider getting at least basic health insurance. Health costs are one of the biggest reasons for filing for bankruptcy and bad credit ratings. Get life insurance to at least cover funeral costs and cover bills for a few months.

3. Pay down debt – A balanced budget should consist of no more than 15% of your monthly income to pay monthly debt such as credit cards or student loan (this can vary based on your income and does not include rent or mortgage). Start small and pay off small bills first then work your way up to pay off larger debts. Double the minimum monthly payments when you can to pay down debt faster.

4. Create a budget or spending plan – create a budget and write down all of your monthly expenses and bills and your total monthly income to quickly see what you are spending your money on. Find ways to reduce expenses. Include savings goal in your budget and save enough money to cover at least 3 to 6 months worth of expenses.

5. Reduce Expenses – reduce your expenses one step at a time. Start small by taking your lunch to work, skipping that Starbucks Latte and bringing your coffee from home, use coupons or buy items on sale to save money. All these little things add up and will give you extra money to pay bills or pay down debt.

6. Don't avoid overdue bills. Many companies are desperate for money and may not follow the proper procedures to collect on a debt. They may file for judgment against you without ever notifying you. Call your creditors right away to setup payment plans to get current on old bills and prevent harassing calls or letters and damage to your credit report

Following these 6 tips will ensure you survive the current recession.

11 Tips to Cut Holiday Shopping Costs

Most Americans accumulate the greatest amount of debt during the December holiday season. The holidays should be filled with joy and laughter not anxiety, pressure or guilty about spending money during the holidays.

If you don't have the money to buy gifts be honest and tell the persons who are expecting gifts just that. If you have a small amount of buy to buy gifts buy what you can and don't use your credit card to buy gifts unless you have the money to pay the debt off in two or three months. Here are 11 tips to help you save money during holiday shopping.

1. Don't buy gifts on Christmas eve or the day before Christmas eve. Selection is limited and lines at the register are longer.
2. Buy Christmas or holidays gifts during store sales in October or November.
3. Spend less money on gifts this year than you did the previous year.
4. Visit local vendors, you can probably negotiate a good deal on the same items you will find in the department store.
5. Think of creative gifts to give that you can make yourself.
6. Visit the local dollar store to find gifts for children.
7. Get a part-time job until Christmas arrives if need money to buy gifts (this will prevent you from using that credit card).
8. Buy gifts throughout the year so you don't feel overwhelmed with buying all of your Christmas or holiday gifts at once.
9. If you have to buy gifts for several family members try doing a "secret Santa" or "grab bag" so only one family member has to buy a gift for one family member and set a limit on the amount spent. That way everyone gets a gift and you don't have to worry about buying several gifts.
10. Shop online, some companies waive shipping and handling fees during the holiday season.
11. Make getting out of debt one of your new year's resolutions.

Copyright © 2007 H.E. Freeman Enterprises