May 22, 2014 by Lisa Brammer
Do you commonly find yourself wide-awake in the middle of the night wondering if you’ll have enough money to hold-you-over until payday? Have you ever gone to pay a bill only to find out you don’t have the funds to cover it? If you’ve answered “yes” to these questions you would probably benefit from getting a little organized.
The first thing you’ll need to do is catalogue your outgoing expenditures. If you sit down and log your monthly obligations you will be able to see where you’re actually spending your money each month. I know it’s a tedious job, but it will be worth the effort in the long run.
It’s kind of like keeping a food diary. Before keeping track of what you eat you think you are gaining weight due to your slow metabolism. Afterwards, you know it’s because you are constantly feeding your face. The same can be done with your finances. Once you are mindful of your spending, the problem might be as glaringly obvious as your daily 400 calorie Double Chocolate Chip Frappuccino was.
Start with three columns: Necessities, Flexible Needs, and Luxuries. Under the necessities column put expenses like your car payment, rent or mortgage, any necessary expense you have that is fixed—you pay the same amount each month. Fill the flexible needs column with other expenses like utilities, gas, and groceries. These items are also necessary, but their costs can vary somewhat month to month. In the last column list items you can live without like entertainment, salon visits, and vacations.
Once you have everything listed, check the total amount going out against your income. If you have more going out than coming in, it’s time to start cutting out those items in column three. I know some services in there seem like necessities when they truly aren’t. If you find you can’t give up, let’s say, the internet, you can perhaps stay online by settling for dial-up or a slower download speed than you have now—that will save you a few bucks each month. There are also creative ways of watching your favorite TV programs without paying high monthly cable or satellite bills—and no, I’m not talking about pirating them! There are many new devices on the market that stream entertainment for a fraction of the cost of cable. When you are done cutting out (or back) on items in the luxury column, look for ways to save money in column two like dialing the thermostat back a few degrees in the winter or carpooling to save on gas.
I’m going to guess by now you’ve realized this post is about budgets and their importance. I think it’s funny that many articles refer to a budget as a “necessary evil.” Seriously? How can a practical way of getting a handle on your spending to ensure your money is spent the way you really want it spent, be considered evil? Granted, making and following a budget isn’t very glamorous, but once you have a grip on your finances you’ll be amazed about how restful your nights will become and how much fun you’ll have planning for big purchases you never thought you could afford.
Pamela Yellen, author of “Bank on Yourself” says most Americans overspend. They take on too much debt and fail to invest for their retirement. Once you get your spending under control you can employ her 10/10/10 savings formula. Put 10% of your gross income away for short-term wants like a vacation, holiday spending, or those killer shoes you’ve had your eye on. Another 10% is saved for midterm spending, to cover emergencies like replacing a furnace, an unexpected medical expense, or buying a new car. The last 10% is saved for your retirement.
The 10/10/10 formula will allow you to have cash on hand for both routine and emergency purchases, saving you the interest you would have paid had you used your credit card.
If you have difficulty staying the course, “there’s an app for that!” Find one that works best for you.
Once you are mindful of your spending it won’t be long before you find all sorts of ways to save money. Remember that 400 calorie Double Chocolate Chip Frappuccino you drink every day? If you swap it out for a coffee you make at home, not only will your waist-line thank you, you could cut about $180 each month from your expenses.
Founded in 1950, United Credit Service, Inc. is a full service revenue cycle management and debt collection agency in Wisconsin providing highly effective, customized one on one management and recovery solutions for our business partners. We offer pre-service collection solutions as well as traditional back-end collections. Visit our website at http://www.unitedcreditservice.com or call 877-723-2902.