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DECIDING TO KEEP A BUDGET
by Diane St. James, Copyright © 2003
Most of my 22 years in the 'work force' have been spent in
this wonderful world of mortgages. But there was a period of
time when my first daughter was 3, that I worked for a
Financial Planning firm about 45 minutes from my home. What
can I say? All the good jobs were Not close by. By observing
the financial planners in their meetings and through my own
education in business and finance, I've come up with a few
suggestions for people on how to manage money better.
DECIDE TO START A BUDGET
First of all, I highly believe in a budget! Do I follow it
all the time? Wait...while I blow the dust off of my
"Monthly Household Budget" book. Well, I didn't say I always
practice what I preach, but if you can write down a budget
and stick with it, that will help.
START KEEPING TRACK
First you'll want to keep track of all your spending for a
few months to see just what you spend money on. Keep a little
notepad with you if you need to, so you know where it all
goes. Little incidentals like that pack of gum, deodorant,
and oooh...don't have that new copy of People magazine yet,
can be put into a miscellaneous category. Depending on how
many categories you have, by the end of the month, this
miscellaneous total may be your biggest! . The monthly
household budget books that you can find at any store like
Kmart, work well, or if you are computer savvy and want to
keep it on a spreadsheet type of program, you can do that.
Write your expenses in the appropriate column and don't
forget to write your income down too.
ANALYSIS AND DISCOVERY
Once you have a few months of income and expenses written
down, take a look at it. Look at it again! Are you spending
more than you are making? Join the crowd! How is this
possible? Maybe the credit card is being used a little too
often, or you are dipping into savings to get the lawn
furniture that is on a special pre season sale. Don't go
blaming yourself entirely (although changing it is up to
you). We live in a world of instant gratification which is
hard to resist.
LOOK AT CUTTING BACK
Look at areas that you can spend less money. Of course
things such as rent or mortgage payments, car loans and
installment loans that will be there every month, you can't
change. Utilities you will have to average, because the
amount you spend will vary each month unless you are on
a budget payment plan like some utility companies offer.
You can certainly save on utilities. Have you ever seen
that commercial where the mom follows the kid around the
house, turning everything off after the kid had turned
everything on and left the room? You can turn things off
that you don't use. Are you forgetful? Get a timer! Take
showers instead of baths. In fact, take shorter
showers...you get the picture.
CONSOLIDATE DEBT
See how much you spend in credit card payments. How many
different ones do you pay on? If it is more than a few
here is a suggestion. Don't keep making the minimum payment
on several different cards each month. They will each
continue to add finance charges, and you are also spending
more in postage (unless you pay electronically or via phone).
Also having several open charge cards with balances on
them (especially if they are close to the limit), will
affect your credit score which is one of the main things
reviewed when getting a mortgage.
Look at the credit cards bills you currently have. See
which ones have the lowest APR (annual percentage rate
as well as have the highest credit limit. Many offer
transfer balance services also at introductory lower rates
for up to 6 months. I would recommend consolidating all of
your credit card balances into two or three credit accounts.
And then don't use these credit cards unless absolutely
necessary. If you have a lot of open credit card accounts,
close a few. This may bring your credit score up as well
and help you resist the temptation to use them.
I myself had some credit issues a few years back and
transferred all my department store balances into one
Visa and one MasterCard account. Sure the balances on
these were now high, but there were only 2 credit card
payments due each month. The minimum payment was more,
but I could pay more because I wasn't trying to split
the money between 10 accounts. Then I tried to add an
extra $20/month to my payment and not use these credit
cards either. My balance started to come down by more
than a couple dollars each month. It can work! I also
saved on postage. Today if you mail payments on 10
separate credit cards each month, that is $3.70 in
postage. Sending 2 payments is .74 cents. So you save
nearly $3.00 in postage. It may only be $2.96, but it
adds up each month. In a year's time it equates to
$35.52 in savings!
SHOP SMART
See what things you may have bought that weren't
really needed. Shop smarter. If there is something on
sale that you use a lot, stock up while its on sale. Then
you don't have to buy it the next few times you are at the
store. Try using coupons when you can, many stores double
them. Do you eat out a few times a week or more? Try doing
it less. Pack a lunch for work more often, instead of using
those vending machines or worse yet going out to lunch. I
think you get the idea. I'm not saying don't enjoy life,
just try to keep a rein on where the money goes.
KEEPING THE BUDGET
Once you have a budget with the amount you'd like to stick
to each month in each category, try to keep within those
limits. It doesn't hurt to put a little in savings each
month too, if you can, but the first thing to do is pay off
any credit card debts that you have. If you can stick to
this plan and follow your budget you will have a better
grasp on your finances and be able to stop wondering
where all the money goes!
Diane St. James is a mortgage professional with over 22
years experience. Her website
exists to help educate people about the mortgage world.
She is the author of 2 e-books, and has been quoted in
the WALL STREET JOURNAL, on msn.com and appeared on
national cable new television CNBC.
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