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Personal Finance Budgeting

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5 Steps To Getting Ahead With Your Personal Finances

 

Few of us have any formal training when it comes to dealing with our finances. Most of us learn the hard way -- through the school of hard knocks. For some those lessons cost very dear in the form of bankruptcy and lost homes. Others are fortunate to ride the storms out and come out on the other side battered but not beaten.

I have learned my lessons the hard way. I do not come from money and my family had to work hard for every penny. Bad choices and bad luck meant hardship and expenses that had to be paid for with even more sacrifice. However it doesn't have to be that way. Here are the five important lessons, or steps, that will make your road to financial security easier for you and your family.

Do you need a makeover? 

The Total Money Makeover: A Proven Plan for Financial Fitness

The Total Money Makeover: A Proven Plan for Financial Fitness

by: Dave Ramsey

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Track Your Expenses 

Step One is simply tracking your expenses. No you don't have to go the route of carrying a little notebook around and jotting down every candy bar or even getting receipts for your morning coffee. However if you want to get a real handle on your money then you need to know where it goes. This means keeping track of all your major expenses and watching the pocket money you set aside for smaller purchases (such as coffee and candy bars). Within a few weeks and certainly by the end of a month you'll know what expenses are eating up your budget which gives you the power to make changes so you can meet your goals.

Create A Budget 

Step Two is to create a budget. Once you have your basic expenses charted then you need to draw up a budget. First outline all the monetary commitments you have made including housing, transportation, food, clothing, entertainment, etc. Now make a note of your goals such as savings, retirement, etc. What adjustments (if any) do you need to make to meet your goals? The golden rule of financial security is only to spend money you have. That means not using your credit cards unless you can pay them off every month. It is not about making more money but simply living within your means. If you want to spend more money then you need to find a way to either save money in one area or increase your income.

Plan Ahead 

Step Three is planning ahead. Do you have a rainy day fund? What happens when you have unexpected car repairs, dental or medical expenses, or some other unexpected expense? How will you fund this? While some unexpected expenses are just that -- unexpected (and that's why it is good financial planning to have a rainy day fun) -- others can be anticipated. You know after so many miles that your tires will need to be replaced and after so many years your hot water heater can be expected to fail. Start saving before the event so you don't have to utilize your credit and even better if you take the time to shop around and save money too!

Start Saving 

Step Four is start saving. You can have just one savings account but likely once you get going you are better off looking into other savings vehicles. Obviously saving your retirement money in your basic savings account is not a good strategy for the long-term. However you can use your savings account to save money for short-, medium- and long-range plans. I start saving for Christmas in January and this strategy means I don't have those depressing post-Christmas bills to pay. It is easy to save a little bit every month and then not worry about how to fund the holidays. Similarly I save for vacations so I don't have to put my fun on credit.

Do Your Homework 

Step Five is doing your homework. It could be as low level as clipping coupons and shopping the supermarket specials but it can really pay off when you look at major expenses such as mortgages and car loans. Should you refinance? Should you simply add another $50 or $100 a month to your mortgage? What are the tax implications of one strategy? Doing your homework certainly means researching and shopping for all major expenses as well as regular bills. My parents moved their cable, telephone and internet service to one provider and saved money while gaining high-speed internet access in the process. I put our utilities on the budget plan so it was easier to control expenses. Our mortgage payment was eligible for a lower rate when drawn directly from an account at the bank holding the mortgage. I designated a savings account and made that account my designated savings account for Christmas and vacations which means most of the time our balance is over the $500 minimum needed for a free account.

Learn more 

This is not tough and it is not a terribly ambitious strategy, but I guarantee if you follow these five steps you will find yourself on the road to financial security.

Learn more about family finance at budgeting money management

Need advice? 

Women & Money: Owning the Power to Control Your Destiny

Women & Money: Owning the Power to Control Your Destiny

by: Suze Orman

Amazon Price: $16.47 (as of 01/08/2009)Buy Now

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Personal Finance Budgeting 

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Lensmaster

solidstate wrote...

Lots of good info here. Great lens. Check out Manage Your Finances and Get Out of Debt
for some more information (www.squidoo.com/freedomfromfinancials).

ReplyPosted December 31, 2008

Lensmaster

buylikebuffett wrote...

Very practical advice that is easy to follow.

ReplyPosted December 06, 2008

Lensmaster

The lens is very nice and I like it a lot and more over the personal financing budget is very much useful.
Checkout my blog
http://financialplannerguide.com/

ReplyPosted September 25, 2008

Lensmaster

Harei wrote

A friend told me a few months ago about this little free online personal budgeting website, I have been using it for over three months now and it is too good to be free. I wish I had this at my disposal earlier in life before I went through my own hard lessons.

For those who want to benefit from a powerful online budgeting utility but do not want to give out access to bank accounts and personal identity, Out Of The Dark (OOTD) is worth a check at:
http://www.myexp.org/OOTD_gate.php

Happy budgeting.

Reply Posted September 21, 2008

The Isle of Squid 

You can find us on The Isle of Squid where you can submit a Site Review

Related topics: Personal Finance Budgeting,  budgets,  budgetting,  How-To & Education,  more

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