Budget Breakdown: Why budgeting can go bad quickly

The magic word when it comes to saving money has and always will be “budget.”

You know, your neighborhood, friendly budget that is the means to an end, with that end being able to save money without even thinking about it.

You piece together a list of your expenses and then your income, and start looking for places to cut the former since you don’t have all that much control over the latter. In most instances, your budget and having one that not only exists but you implement is the trick to getting your finances in order but also saving money where you need to the most.

But can a budget be a bad thing?

Truthfully, it certainly has the potential to do so, given that budgeting can’t be taken to the extreme when you set realistic expectations that you simply can’t meet. Not being smart with your budget doesn’t mean simply not to follow it but also can equate to having a budget that makes things way too difficult on yourself moving forward, no matter how bad things might be.

Living without cable television or cutting your cell phone down from one of the major carries to one that is more of a smaller time entity or a pay as you go should be fine, and doesn’t fall under the “extreme” umbrella. What could cause you problems, however, is banishing your food budget to just cans of tuna and beans for the next 6 months, and not allowing yourself to spend dollar one on a meal out at a restaurant.

Granted, eating out and spending breakfast, lunch and dinner on restaurant or fast food dining will take up a lot of your free spending money, but that doesn’t mean an anniversary or birthday dinner needs to be skipped sporadically.

Just because you put pen to paper doesn’t mean the budget works. It has to be realistic and set forth a plan that you actually can follow. No one, as far as dieting goes, can transform from burgers and French fries to carrot sticks and boiled chicken within a week. You have to slowly ween yourself off your diet; the same can be said for your budget.

Start with items that you know you don’t need and work from there; start cutting small and then work your way up to things like refinancing a home or car, if you truly need to go that route.

What won’t matter, if you take that path, is your budget as a whole. It will be nothing more than a dream that won’t ever come to fruition.

Small Wonderful: Why you can live big on small budget

Without getting too cliche, you can live life as you see fit on a budget that works for you, even if you’re not a millionaire or have the kind of lavish spending that others you know do.

Being able to get by on a small budget, meaning that you spend and save like everyone else, but don’t do the former quite the same because your income dictates otherwise.

In most instances, living small doesn’t mean you have to stop spending or all of a sudden implement a spending style that goes against what you truly want.

Shopping and eating out at restaurants is a perfect example of this point. Those who live “small” still spend money on clothes and go out to eat at restaurants, but they do so with extreme patience, virtue and a flair for the finer things.

Now, that might sound as though it makes little sense since the “finer things” and a small budget don’t go hand in hand.

But consider it from a different perspective: if you buy clothes every day or every weekend or with some regularity, then you’re going to not only spend more but you won’t get what you want, instead feeling as though you have to buy cheap and more frequent. Rather than buy a bunch of $5 shirts, why not shop once every six months and buy yourself something a little nicer since you’ve been saving on a whole lot of $50 or $100 trips every weekend.

You can look at food in the same breath.

Spending $10 for lunch and another $20 for dinner three days a week adds up quickly (more than $1800 in six months of food shopping). Imagine if you packed a lunch, cooked dinner at home and went out to a fancy dinner with your significant other once per month for $100 a pop. That’s $600 spent versus $1800 for what only could be described as a lunch time sandwich or salad or a dinner meal at a chain restaurant.
And as long as you’re being smart with food, think about eating out for lunch and skip dinner. Lunch could be a $10 meal and if that same person mentioned earlier cuts out a $20 three days per week, that $1200 in their pocket or more in six months and more than $2,000 saved each year.

Living small doesn’t mean you’re never going to be able to enjoy the good life. That life just gets better when you can splurge and still save at the same time.

 

How you’re losing money every month

Sometimes a budget is only as good as the person who created it or just how diligently it is followed.

Simply put, the budget, specifically having one, isn’t a full proof method to be able to save money if a few things aren’t lining up properly.

Does the budget make sense? Does it account for everything? More importantly, are you accounting for everything?
The problem centers on you having a budget that on paper looks pristine but the execution of it leaves you in the red every month. So, how do you have a budget and yet you can’t manage to save any money as one month rolls into the next?

Chances are, you’re losing money in places that you might overlook or are a given and, secondly, you aren’t treating your budget like a business, one that you can always adjust to save money and eliminate expenses for a better bottom line.

For starters, do you track how much you spend on eating out at restaurants or grabbing a quick lunch on the road? Those dollar figures aren’t just incidental in the way of expenses that you can forget about, but rather need to be accounted for each time you spend. The average lunch bill, eating out three times per week for an entire year, can cost you nearly $2,000 per year. While that number doesn’t sound like much when you’re only dropping 8 to 10 dollars on every meal, it certainly adds up quickly. The same could be said for not paying attention to bottled water, coffee, cigarettes or even the consumer who buys themselves a $50 shirt every time they get paid. If you don’t believe those purchases aren’t important, then you’re not accurately falling under the “budgeting” umbrella.

As far as expenses and treating your budget like a business, you should constantly be combing over your numbers to see where you can save money. Maybe ditching $200 per month on cable versus a $12 streaming subscription is a means to save extra cash. Perhaps it’s been a while since you shopped for insurance rates for your vehicle, and since you’re such a wonderful driver, you’re actually overpaying at the moment. Maybe a home refinance would be in order to get a better interest rate and a lower payment. That cell phone plan, too, might be creeping a little too high for you, and your office just gave you a company phone you can use as your own. The smart money is cutting your ties with your personal line.

Those little tweaks can take what is an average, run of the mill budget that is underachieving and underperforming and turn it into a money-making powerhouse.

Retired Thinking: Why can’t you save for retirement while young?

So, you’re 30 something years old and you still haven’t saved for retirement.

What now?

Well, maybe you assume you still have 20 or 30 years to save, and that should be adequate amount of time to get to 60 or 65 years of age and not have to worry about going back to work at 70 since you really didn’t save as much as you thought.

Your 30s are the ideal time to not just start saving for retirement but to revisit what you are doing and make necessary changes in order to make sure you’re retiring in style, rather than scraping together at the 11th hour in the hopes that you’ll have what you need.

Saving for retirement is twofold: it’s about saving money when you should be at an age when you’re settled and also looking at retirement as more than just socking money away on your own.

You have to ask yourself tough questions, like if you have adequate retirement funds set up, such as an IRA to go with your 401K at work. You also have to resist the temptation to take from the 401K, not only do you face early withdrawal penalties but also that little voice in your head that says you need to borrow $5,000 for a home repair and can easily get that back in your 401K in the next few years. That mentality might work for an emergency medical issue or bill that needs paid, but you can’t keep going back to that well every time you are in a pinch.

And pinching is what you should be doing with those pennies as far as being able to save money in your 30s. You’d like to think that you have a home, a car and are relatively secure with your possessions, so you might want to consider revising your budget and scaling back in the most appropriate and easiest of places: cable television, clothing allowances, cell phone up charges, bank fees and eating out at restaurants for breakfast, lunch and dinner or any combination of those three.

As much as your 30s can be viewed as a time to think about making as much money as possible and enjoying your youth, you can’t overlook retirement, particularly if your company is offering you a head start or if you’re simply forgoing the planning part for the sake of spending versus saving.

Budget Breakdown: Why your budget is only as good as how it adapts

Having a budget isn’t a full proof way of assuring you’ll be able to save money, pay bills on time or have a general, strong understanding of your finances.

The misconception is that just because you put pen to paper and thus have accounted for your car payment, house or apartment or your utilities that you’re on the right track to becoming more successful when it comes to money.

Truthfully, that’s just a small part of the budgeting process as other elements play into all of things you want to do with your money beyond just knowing that it exists and where you hope it is being allotted.

Experts argue and with good reason that your budget has to be adaptable; it has to be able to change with how your lifestyle, job or other elements can shift in one direction or another.

Would you believe that someone can get take a pay cut at work and leave their budget absolutely untouched? You’d think that those with any sort of financial acumen would be trying to look for easy places to start cutting expenses as well, such as cable television, cell phone perks or spending money on clothing less frequently then previously.

The status quo when it comes to your budget, simply doesn’t work.

In addition to any pay changes, you also have to consider your retirement as it pertains to your income and how you save money.

If you’re thinking about retirement or have decided to invest a portion for the first time, you have to consider that as you get yearly raises, bonuses or cost of living expense increases, you might want to alter your contribution to your retirement account and increase it with each year, so you can build your wealth or take into consideration how the market might fluctuate. If your company has a match program, you’ll want to take that into your thought as well.

No one is going to argue that a budget is the way to start saving and to beat debt into the ground, while keeping track of everything and anything that is money related. But budgeting isn’t a one and done proposal. It’s about a constant changing effort to manage your money, with a key on the word “manage.”

If you are a manager at work, manage a team or are in charge in some form or fashion in any realm of your life, why shouldn’t money be the same? You don’t all of a sudden start managing and then stop looking to get better, and money should carry with it that same mentality.

Money Mattering: Why common budget mistakes can be avoided

Do you often update your budget?

Do you even have a budget?

Perhaps when it comes to spending, you don’t have a plan and you simply “wing it” and assume that you’re making more than you spend, whether that comes in the form of simply paying bills or buying what you want rather than need.

Let’s start with that over or under estimating your spending. If you aren’t sure what you’re spending on or, even worse, how much you’re spending, then you need to adjust that immediately and that starts with a budget.

That budget also should consist of a plan to save money for the future or for expenses that might be the unexpected, such as taxes that need paid, home repairs or something else of that ilk.

The real issue that most face and one of the more common mistakes is not really looking at money in the purest sense or buying as though you have all the money in the world. Think about the car you own; did you buy it based on the money you have or the car you want? If it’s the latter, you’ve likely overspent on a car that is much loved, but the monthly payment hardly is the same.

Overspending isn’t just about not budgeting but also not looking in more unique places to get what you want, more specifically buying used when that is perfectly acceptable and must less expensive.

The first thought in that school of thought is car, but what about your home?

Far too many who struggle with money buy too much home, and that isn’t to suggest they don’t need the three bedrooms or extra living space in the basement, but more about the monthly mortgage payment and the overall cost of the house.

The common phrase “house poor” is all too familiar in that your mortgage takes up more than half of your monthly income, a sure fire no-no in the world of budgeting and saving money.

Finally, money isn’t just the root of all evil but it also is something you like to pretend you have even if you don’t. Not having money just means your budget looks different than that of your friends, so trying to buy the same wardrobe, the same car or the same vacation plans is only going to put you further behind in your plans for financial success and freedom.

Making mistakes with your budget is nothing new. The trick is figuring out what you’re doing wrong and adjusting it before mistakes start to feel like commonplace.

Personal Problem: Is a personal loan the answer to paying off debt?

Credit card debt is a topic that is tough for most people to indulge in discussing, mostly because everyone has debt and paying it off can be difficult if not feeling nearly impossible.

So when it comes to tackling debt in the form of credit cards, you might be willing to entertain just about any option that you can think of, even if it means adding to the pile.

Consolidation is paramount for some, simply for convenience purposes of making one payment and calling it a day. The consolidation road can center on two avenues: debt consolidation companies that overtake your debt and help you manage it or quite simply a personal loan that can use its Superman like qualities and knock out your debt in a single swipe.

The debt consolidation plan through a company works, but that renders your credit cards cancelled and obsolete and will ding your credit score as a result. It doesn’t mean you’ll not be able to have credit or get more important loans, but that is a deterrent for the masses.

A personal loan allows you to have a fixed interest rate (which is a breath of fresh air versus doing balance transfers on credit cards that change drastically once the promotional rate that is introduced goes away after 12 or 18 months).

Before going into a personal loan, you have to make sure you’re able to carry something like that, first by checking your credit score but also making sure you’re not going to get saddled with a high interest rate based on your debt to income ratio or income in general.

If you don’t have the income to carry personal loan, what ends up happening is you borrow less than you need to consolidate and still have a stray card or two to pay on in addition to paying back that personal loan.

The real selling point of the personal loan is that one stop shopping (or paying back) mentality. The personal loan can take multiple lines of credit and allow them to be paid off and that one lump sum monthly is important for the purposes of convenience. That is hard to understate for the people who have a lot of debt and a lot of cards they’re trying to manage.

Having credit card debt is troubling and disheartening but it doesn’t have to be a mountain that you can’t climb. Taking a personal loan should mean that, credit wise, you can carry it with an interest rate that only alleviates the problem, not adding to it.

Home Furnacing: Are you burning through money trying to redecorate?

I recently moved into a new home that was, for lack of a better term, outdated. The good news is that the major players we all look for in a home: windows, roof, heating system and cooling, carpeting all were pristine and in perfect shape.

The house was groomed well with landscaping that wasn’t about to skip a beat, and nothing major needed to be done.

Just a makeover of the home inside, as far as decorating in all facets of the word. I came from an apartment with furniture and a design flare donated and inspired by my parents, and that simply wasn’t going to do in a time like this when I have my own house.
That house should, in essence, reflect my style, too.

But how do I have that penchant for style in my home on a budget? That part isn’t quite as daunting as you’d think, particularly if you know where to cut costs and minimize spending.

As far as furniture, and perhaps aside from food, this product has a markup that would make Donald Trump blush. Furniture is terribly overpriced, and you need to prioritize how you’re buying it and what you’re spending.

For instance, if your furnishing a second bedroom, maybe a cheaper outlet like Ikea and its small, modular furniture would be better, and you can focus your attention on a bedroom mattress that is a little more expensive, but with the understanding that you’ll be sleeping on it, not the spare one, every day.

Furthermore, if you have an adverse reaction to garage stores or buying furniture second hand, then you’re missing out on being able to save hundreds if not thousands. I wouldn’t recommend buying a mattress second hand, but what about things like end tables, coffee tables, and other items of that ilk that can easily be purchased for next to nothing and perhaps stripped and repainted or stained to make them look as though they came directly from a high priced, higher end furniture store.

As for those bare walls, you can line your place with pictures but if you have a flare for fashion, why not let your accessories do the work for you. My girlfriend has her scarves, hats and other stylish accessories hanging on the walls, and it looks great, proving that you don’t need pricey wall art or photos to make your walls pop.

And there’s also nothing that says some of those mom and dad hand me downs aren’t all bad, either, especially if they’re the kind that can be remade or molding into more of what you want.

A new place comes with great financial responsibility, but if you’re pressed for cash, push back and use your creativity and money prowess to put money in your pocket and everything else in your house at the right price.

Credit Death: Why certain moves will always kill your credit score

Think about your credit score and the advice you receive from friends, a family member or anyone else (including a financial planner) about that score and how to protect it.

You may think that protecting a credit score simply means making sure you pay relatively the date due and having debt is just a part of everyday life.

But destroying your credit score is a reality that most ignore, and they don’t follow simple rules to keep that three digit number on the straight and narrow.

And we all know what a poor credit score means in the grand scheme of things as it relates to money: you won’t be able to get it, nor are you going to be able to get a credit card, borrow money or get a car or house with much ease.

Don’t forget as well that a bad credit score also means your interest rate if you are able to get a loan is going to be heavy, to say the least, and you’ll end up spending more in interest than you on the principle, and that’s a place no one wants to be.

To keep your credit score in line, you want to focus on two elements: paying on time and keeping your credit levels at a reasonable level (i.e. not maxing out your credit card). Maxing out a credit card is a huge credit score red flag as creditors see a $5,000 credit limit and the balance sits at about that or maybe only a few dollars less. This is called a bad credit utilization rate, and creditors see it and assume that you aren’t going to be able to accept any more credit, certainly not from the reputable ones anyway.

Paying on time might be the easiest yet the most difficult element to control for the general public to get right when it comes to their debt. Late credit card payments not only carry with them a late fee, but carry quite the relevancy when it comes to your score: something in the neighborhood of 35 percent. You want to stay as close to that payment date as possible but certainly not past it, and if you manage to go past 30 days, you run the risk of having that reported to a credit agency and thus turn it over to collections. That, in itself, is worth about 100 points of a drop to your score.

Keep that score alive and kicking by doing not much more than pay attention to paying on time and reminding yourself that the money on those credit cards needs paid back, so keep it minimal at best to maximize your score.

Saving Money After the Holiday Dip

The financial dip is the wallet-depleted period that immediately follows the holidays. It is the period that starts in the beginning of the year and ends when the weather warms in some areas. Most consumers have nothing but lint in their pockets at this time. Some consumers have a difficult time recovering from the dip period. The following are some tips that all consumers can use to save money after the holiday financial dip:

Do Some Bill Snipping

One way that modern consumers can save money after the dip is by snipping the household bills. Some of the bills such as the cell phone bill, car insurance bill, Internet bill and cable bill are open for consumer manipulation. What that means is that the account holder can contact customer service and remove some of the unnecessary features and add-ons until the post-holiday finances recover. Examples of bill add-ons are premium cable channels, cell phone music and data features, additional gigabytes of Internet, and collision and comprehensive auto insurance coverage. Consumers often surprise themselves when they see how much of a difference a little bit of bill snipping can make.

Start a Couponing Hobby

Many people do not bother themselves with coupons because they do not want to take the extra few seconds or minutes to stand in line or type a code into a website. The beauty of the dip period is that it provides consumers with the opportunity to do things that they would not normally do. Coupon codes, promotional codes and discounts codes are available on a vast number of websites as well as in the paper circular. They can help a struggling post-holiday consumer to get by and get back on his or her feet after spending so much money.

Go on a Penny Hunt

Many consumers turn their noses up at pennies because they are the least of all the money. However, these little brown coins can get people out of many tough situations. A group of them can put food on the table. They can buy gas. They can even purchase clothing. The best thing about pennies is that they are all over the place. Consumers can find them under the mattress, in the car, behind the dresser and more. A post-holiday consumer can probably find some serious cash by going on a penny hunt. Bank machines can help consumers turn their pennies into dollars.

There are ways that one can bounce back after the holiday doldrums. Consumers can start with the previously mentioned tips and go from there.

Savings Gone Wild