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6 ways to take control of your finances right now

piggybank_360.pngDoes it always feel like your finances are spinning out of control? If you have a hard time keeping up with your bills each month or just can’t stick to your budget (tip: check out our guide), it may be time for a quick financial cleanup. Even if budgeting isn’t your strong point, there are several things you can do to keep yourself in the green in the money department. Taking small steps to improve your money management skills will pay off in the long run.

Here are six things you can do to take control of your finances right now:

#1: Schedule monthly bill payments. Whether it’s the electric bill or credit card payments, stay ahead of your bills by scheduling bill payments online and set up automatic payments whenever possible. Automating bill payments can prevent late payment fees and protect your credit score. Just make sure to update your monthly budget with the payment amount so that you have an accurate idea of how much cash you have on hand in any given month.

#2: Build your cushion. Even if it’s $5 a week or $100 a month, make contributions to an emergency savings account every single month. Even small deposits will add up over time and you may be surprised how much you will have stashed away within a few months. Be deliberate about making contributions to this fund every week or every couple of weeks to build up that cushion with minimal effort.

#3: Get friendly with a budgeting app. We’ve recommended several budgeting apps and online tools for keeping track of expenses and putting together a realistic budget in previous posts. Take some time to learn the ins and outs of your app of choice so that you are comfortable using it regularly. Whether you decide to log every expense or just want a bird’s eye view of your cash flow situation at any given time, learn about the app’s different features so you get the most benefits out of the habit.

#4: Organize your bank accounts. Do you have more checking and savings accounts set up  at different banks? Having multiple accounts only makes sense when the bank can offer you attractive rates and low fees on different banking products. If you are having a hard time figuring out exactly how much you have in savings or available to spend, consolidate accounts to one bank and consider setting up sub-savings accounts to organize your finances. Maintaining just one good banking relationship may be all you need to get a better handle on your finances.

#5: Get chatty with creditors. If credit card debt is one of your biggest financial concerns, give your creditors a call to negotiate interest rates and review your account. Some can do this without running a credit check and may be open to lowering your rate if you’ve been a longtime card holder and are in good standing. It never hurts to ask and this simple step could help you whittle down that debt load faster.

#6: Accept the budget. Budgeting isn’t always fun but you need one to better manage your finances. We’ve been sharing tips for putting together a healthy household budget these past few weeks and now is a great time to get started. Even if it’s something as simple as a spreadsheet or something more complex like a software program (we’re big fans of You Need a Budget), accept the fact that you need some type of budget to map out your finances. Accept it. Embrace it. Enjoy some peace of mind.

Budgeting (Part VI): Staying on course – Keeping your budget on track

piggybank_360.pngWe’ve been guiding you through the process of creating a healthy household budget these past couple of weeks and this week’s post wraps up our budgeting series with some tips for staying on course.

Your budget won’t work unless you make a commitment to stick with the plan. Like a healthy diet, you can’t expect it to work until you make some lifestyle changes. You might not need to do a complete spending overhaul to get results, but you will need to hold yourself accountable and make sure you’re being realistic with your goals.

Here are some simple ways to keep your budget on track:

  1. Set weekly goals. Don’t wait until the end of the month to figure out what went wrong or why you couldn’t meet your monthly goal. Set weekly goals and monitor your spending closely — at least for the first few months — so you can identify any spending leaks before they make a dent in your budget. Setting weekly goals and keeping track of your spending can make you more mindful about your spending habits so that budgeting is just a little easier.
  2. Recover quickly. Emergencies happen and you may end up spending more than planned in a given week. If you end up going over budget, don’t use that as an excuse to go on a spending spree or give up altogether. Just assess the damage and acknowledge where things went awry. Correct your course quickly so that you can get back on track and recover from the setback.
  3. Don’t cut out too much. We talked about the benefit of making room for miscellaneous purchases in your budget in a previous post. Remember that cutting out too much too soon can backfire and can make it that much harder to stick with a budget. That $5-a-day coffee habit can add up over the course of the month but if it adds something to your life — the opportunity to socialize with other coffee lovers, the ability to work remotely from the coffee shop, or a change of scenery during a stressful day — it may be an expense worth having. Be as thorough as you can when listing expenses but make room for some extras that improve your quality of life.
  4. Operate on a cash-only basis. Break credit card spending habits so that you are only working with money you actually have. Even if you plan on paying off the balance in full at the end of the month — hey, credit card rewards can be a good thing — it can be tricky to keep track of those expenditures and avoid the temptation of spending more than planned. You’ll find it easier to keep your budget on track when you spend only what you have and aren’t ‘pre-paying’ for purchases that you haven’t budgeted for.
  5. Use smartphone apps to your advantage. If you have a hard time tabulating expenses for the week and want to get better at monitoring your spending habits, start using a smartphone app. We recommended Expensify or the Billguard’s spending tool to track your spending. Mint’s budgeting app also makes it easy to log expenses using your smartphone or other mobile device. You can categorize and organize your spending to see trends and create a budget from the data. Level Money is a personal finance app that divides your income into categories and connects to your bank account for real-time data tracking. You can see how much spendable cash you have with a few screen taps and watch your savings account grow at a glance.
  6. Revise and update regularly. Don’t expect to have the same budget a few months from now. Emergencies happen, you may change jobs, or you might get a raise. Revise and update your budget regularly so that it’s as accurate as possible. Adjust your goals based on your needs and revise the budget to accommodate for lifestyle changes. Revising and updating your budget once a month or every few weeks can help you stay on course.

Budgeting (Part V): Financial checkup – Five tips for cleaning up your spending habits

piggybank_360.pngLiving within your means is one of the keys to financial success, but are your spending habits preventing you from reaching your goals? We’ve been sharing tips for creating a healthy household budget these last couple of weeks and today we’ll focus on ways to clean up those money habits to keep your budget on track. You don’t have to be a reckless spender to do some serious financial damage — sometimes it’s those little everyday habits, like out-of-network ATM withdrawals, last-minute purchases, and buying items in bulk that you never use, that end up costing you more than you realize. Here are some things you can do to clean up your spending habits:

  1. Always (always) shop with a list Taking that small step to write down exactly what you plan to buy on your next shopping trip can make you more mindful about your purchasing decisions — and ward off a spending spree. Avoid impulse buys and sale items that catch your eye so that you aren’t spending more than planned. Whether you use a notepad app on your smartphone or do things the old-fashioned way with pen and paper, just make sure you have some shopping guidelines by your side on every shopping trip.
  2. Shop around Resist the urge to buy something on impulse when you’re shopping at a store and stay clear of all types of flash sales online. The urge to splurge will pass if you take some time to broaden your purchasing options. Get into the habit of comparison shopping online to find the lowest prices in your area or lower-cost alternatives. Shopping apps like PriceGrabber make it easy to compare prices on a product just by scanning the barcode. RetailMeNot is a popular coupon site and shopping app for finding current discounts and coupon codes for hundreds of popular retailers.
  3. Know your triggers Do you tend to spend more when you’re stressed, angry, or bored? If you are an emotional spender, it can be even more challenging to keep your budget in the green zone. Identify your spending triggers and recognize an oncoming shopping spree before it starts. Some introspection can help you get a better handle on your finances and ward off a financial disaster.
  4. Break the credit card habit If you tend to turn to credit cards to cover monthly bills or just have a habit of charging everyday purchases to your credit card, take a break for at least three weeks — the time it takes to make or break a habit. Spending money you don’t have via credit cards can perpetuate an unhealthy cycle and make it very difficult to get a handle on your budget. Take steps to eliminate credit card spending so that you can operate on a cash-only basis.
  5. Take stock of unnecessary recurring expenses Take a closer look at any recurring fees you’re paying for membership and subscriptions each month. Do you really need that newspaper delivery subscription when you can read articles for free online? Is that gym membership you paid for — with good intentions, of course — at the beginning of the year actually being used regularly? Authorize a cancellation for memberships and subscriptions you aren’t using anymore and make sure to account for any cancellation fees and charges.

Making changes to live within your means will not only ward off credit problems but can also help you make better purchasing decisions. Stay tuned for the next post in this series where we’ll talk about smart ways to set budget goals and keep your budget on track.

Budgeting (Part IV): Savings essentials – How much should you be saving?

piggybank_360.pngLast week, we talked about doing a debt checkup to help you create a realistic household budget. If you followed the steps outlined in the post, you should have a good idea of what your current debt load looks like and how much you can realistically contribute to your debt payoff plan each month. Today’s post focuses on your savings contributions.

How much should you be saving every month? How much are you actually saving each month? Getting into the habit of saving a percentage of your gross income every month can be tricky but there are several things you can do to make the process a little easier.

How much should I be saving?

Whether you’re contributing to an emergency savings account or saving up for an exotic vacation, you’ll need to determine what your baseline savings contribution is every month. How much can you realistically set aside for savings after major expenses have been taken care of? For most people, a safe number to start with is 10 percent of your gross monthly income.

If you get your paycheck via direct deposit, talk to your bank about setting up an automatic transfer to your savings account each month or create an automatic transfer via online banking. You can then break down that 10 percent to save for different purposes — an emergency fund, gifts, a new car, or a downpayment on a house — by setting up a sub-savings account. Organizing your savings contributions like this will make it easier to watch your savings grow from month to month.

Three reasons to pencil in a savings ‘expense’

Automating your savings is one of the simplest ways to build up a savings account quickly. Automation simply means that you set a specific amount of money aside every month for your savings account — you don’t think about it, you just pay yourself the same amount month after month. Plotting this contribution into your budget as an expense can make things a little easier. Just add ‘Savings’ or ‘Emergency Funds’ to your budget as a line item and look at it is another fixed expense. Here are three reasons why setting up your savings as an expense works so well:

  1. You can set it and forget it. Instead of trying to calculate how much to save — or deciding whether you should save anything at all — in a given month, treating savings as a regular expense lets consistent with your efforts without having to overthink the process.
  2. You’ll develop a healthy money habit. If saving money doesn’t come naturally to you, automating your savings can help you develop a healthy money habit for the long haul.
  3. You’ll be less likely to talk yourself out of it. How many times have you decided to ‘save more this month’ but somehow found a reason to spend away potential savings? When you automate your savings and make a commitment to just keep making those monthly ‘payments,’ you may be less likely to talk yourself out of it.

We’ll discuss specific ways to save more money in future posts. Stay tuned for our next post for tips on cleaning up your spending habits.

Budgeting (Part III): Debt checkup – how much do you really owe?

Credit cards, car loans and the mortgage are all contributing to your debt load. If you want to pay off debt faster or just be in a better financial situation a year from now, it’s time to work on your budget. We’ve been working on setting up a healthy household budget this past week, and today, we’re going to dive right into debt management. It’s important to keep in mind that not all types of debt are necessarily bad — some forms of debt, such as your mortgage, are actually considered to be a ‘good’ debt because they help to prove creditworthiness. Other forms of debt, such as store credit cards, car loans and payday loans, fall into the ‘bad debt’ category because they can have a negative impact on your credit score and may be a sign that you are living beyond your means.

Debt checkup step-by-step

This week’s budgeting task is to focus on debts listed in your fixed or variable expenses categories. Use this step-by-step guide to analyze your current debt load:

  1. List all current liabilities. Pull out all billing statements and loan payment stubs to determine how much you are responsible for paying each month. You need to include: all credit cards, bank loans, personal loans, business loans, student loans, taxes and mortgage payments in this list. Make a comprehensive list of the minimum payment for all of these liabilities and the interest rate you’re paying then make a list of the outstanding balances.
  2. Prioritize your debts. Go back to your list of liabilities and determine which debts have higher balances and high interest rates. Rank your credit cards from highest to lowest interest rates to see which credit cards need to be paid off faster.
  3. Review the budget. You need to know how much you have available for debt payments before you can put together a realistic payoff plan. Comb through your budget to determine how much you have left over after all income has been accounted for and all expenses have been taken care of, including any savings contributions. You can adjust these figures after you have a baseline to work with.
  4. Negotiate interest rates. If you have a good track record of making payments on time, you may be able to negotiate interest rates with your lenders. Contact credit card companies and your bank to find out if any of your rates are negotiable.
  5. Organize payments. Go through each type of debt individually to determine how much you can realistically pay each month. Choose a figure that’s higher than the minimum payment on credit cards so you aren’t paying high interest rates. Consider making larger payments towards your mortgage, student loans, and other ‘fixed’ payment debts if you can afford to.
  6. Budget for debt payments. Turn those debt payments into a recurring expense by putting the total payment amount right into your budget. As long as you are making more than the minimum payment on those credit cards and paying down other loans consistently, you will be on track to pay off that debt sooner than later.

Debt payoff tips

Here are some other things you can do to pay down that debt load that much faster:

  • Find ways to increase income to make more payments towards your debt load (in a perfect world, right?)
  • Consider balance transfer offers
  • Pay off higher balances and high-interest rate credit cards first
  • Negotiate rates on your bills, such as cable and telephone, or switch providers to save money and make larger debt payments
  • Consider consolidating high interest debt under a lower interest line of credit. This is also a good time to cut up those high interest credit cards.
  • Scale back spending on entertainment and luxury purchases to free up cash for debt payments
  • Consider dipping into savings to pay off debt
  • Consolidate high-interest debt like store credit cards into a single, lower interest debt like a line of credit. Word to the wise: This is a good time to take stock of your credit cards and which ones you actually need. Avoid the temptation of running those credit cards back up.

We’ll discuss more debt payoff strategies and money-saving tips in future posts. Stay tuned for the next segment where we’ll talk about creating a solid savings strategy.

Budgeting (Part II): Where does the money go?

Last week, we shared some tips for taking control of your finances and recommended tracking daily expenses for at least 72 hours. If you’ve been logging your purchases for the last few days, you now have a fair idea of how much you are spending on those little extras — fast food, coffee, or impulse buys at the convenience store. Today we’ll focus on the expenses column of your budget so that you can classify and organize your expenses, and see exactly where your hard-earned money is going each month.

Fixed vs. variable expenses

Take some time to list all of the bills you pay and purchases you typically make over the course of the month. This master list will make it that much easier to identify your fixed and variable expenses, and account for all of your monthly expenditures.

Fixed expenses are the costs that don’t change (much) from month to month. These might include:

  • Mortgage or rent payments
  • Property taxes
  • Insurance premiums (medical, dental, car, life insurance, etc.)
  • Income taxes if self-employed
  • Utilities
  • Cable and Internet
  • Phone services
  • Subscriptions, memberships and monthly dues
  • Savings or investment contributions
  • Debt payments (if the amount is the same from month to month)
  • Recurring medical expenses

Variable expenses are expenses that tend to fluctuate from month to month, and are costs that you do have a certain degree of control over. These might include:

  • Groceries
  • Debt payments (if it varies from month to month)
  • Entertainment
  • Gas and transportation
  • Gifts and donations
  • Clothing and personal items

Adding up the total expenses from each category will help you determine how much it costs to live your current lifestyle. Doing this for even a few months can help you get a fairly accurate idea of what your actual cost of living is, based on current needs and habits. At this stage, you also need to accommodate for one more ‘type’ of expense: miscellaneous expenses.

Making room for the miscellany

This would be a good time to take a closer look at that spending log you started a few days ago. Making room in your budget for ‘miscellaneous expenses’ can make it that much easier to manage your budget and still enjoy some spending freedom. Are you really going to create a budget for those coffee runs? Unless it’s a daily habit, it’s unlikely those coffee fixes or the occasional meal out is going to be a fixed expense.

Let those extra purchases fall under a miscellaneous category so that you can:

  1. Enjoy little luxuries like coffee, drinks after work, or going to the movies without going over budget
  2. Account for extra purchases as a whole, based on your average weekly spend from your spending log calculation.
  3. Have peace of mind knowing that those extras are already accounted for.

Think of your miscellaneous expense category as your own expense account — one you may or may not end up tapping into over the course of the month. When you have a handle on how much you are spending in this area on a weekly basis, make room in your budget for it as a fixed expense. It will simply serve as a cushion to help you better manage your budget.

Stay on budget with this simple tip

One of the first things most people do when it’s time to start budgeting is to cut out all extras. If you eliminate all of your favorite things at once, the effects of ‘depriving’ yourself can trigger the urge to spend more … and go over budget.

If you’ve discovered that you are, in fact, buying unnecessary items or shopping impulsively, focus on curtailing those habits instead of cutting out all spending. If your goal is to save more money over the course of the month, focus on culling some of the larger variable expenses in your budget and work from there.

We’ll share tips on scaling back on certain expenses in future posts.

Stay tuned for the next segment of our series where we’ll do a quick debt checkup and provide tips for putting together a debt payoff plan.