Budgets are good… Budgets are great…
But who really likes to budget, they truly are a pain in the rear and I have not found one person who likes doing a personal budget.
1. Why do people hate budgets so much?
Many people associate budgets with being poor, having do watch every penny. People often have the idea that if you do not know how much you really are spending that it doesn’t really seem that bad. To some maintaining a budget is like admitting that darn I screwed up and now I have to live like I am poor to get out of it. They then will usually not do the budget and just keep spending more than they make digging a larger and larger hole.
2. I hate budgets, now what?
I would only recommend this if you cannot follow a budget. You need to setup automatic deductions that will pull a set amount of money each pay period into a savings account, this will force you to live on less and save more. The best way to make this work is to only spend cash, that way you cannot spend more than you actually have. If you continue to use credit cards you will over spend and dig a bigger hole.
This has personally worked very well for me.
Derrick
Have you ever walked through a store and come down an aisle and see some little kid all red in the face, saying ” I want it right now!” Well that is kind of how I feel. My current TV is almost 10 years old and the picture tube is starting to go. I can’t tell you how many times I surfed over to the Amazon website and looked the the Sony XBR LCDs and Samsung models, I just can’t bring myself to buy one(yet).
I have also considered following my own advice and canceling TV, currently the monthly payments do not hurt me and are within my budget, I do not have any debt other than my mortgage and a car payment, if I had one smidge of debt other that these two items you bet TV service would have been long gone.
This brings me to the real point of this post, how many times do we really really want something, but do we really need it? I know I fight these urges and I bet many of you feel the same way.
What are some of the other things that I have really been interested in? The Ipod Touch, a mac book pro and a few other gadgets.
Derrick
Ok lets say you are determined to start saving for your financial future, paying down debt, reducing expenses and trying to increase your income any way possible.
The first thing your should do after cutting back your expenses is to build up a small emergency fund. Initially I opened up an Ing Direct account and had $100 per month taken directly from my checking account where my pay was automatically deposited. Once I saved up $1000 in this account I lowered the monthly contribution down from $100 per month to $50(this was so I could apply the additional money towards outstanding debt).
What is an Emergency Fund?
It is money automatically put aside from each pay check to be available in case of emergency. An emergency is not needing that new movie that was just release on DVD or a new purse that is on sale. An emergency is needing a new battery for your car, a new hot water tank etc…
Like mentioned earlier $1,000 is a good goal for the initial emergency fund. If you used $350 for a new hot water tank then you increase your emergency fund contributions until it is back up to $1,000. This is your safety blanket fund, this is what lets you sleep at night knowing that if your refrigerator dies tomorrow you can afford to buy a new one without going into further debt.
Once you have much of your debt paid off you should increase your emergency fund to allow for a 6 month cushion in case you lose your job or have health issues where you cannot work.
What if I do not have any money to setup my emergency fund?
Simply put find it! Re-read our cutting back post and see if there is something you can cut back on, so you can find the funds to start up your emergency fund.
1) If you get a bonus at work put these funds into your emergency fund, do not waste this money it is “found” money.
2) Most of us drink soda, or pop, many states have bottle refund laws, here in New York you get 5 cents per bottle, when I take back bottles this money(even though it is a small amount), goes into my emergency fund. Believe it or not I live across the street from a baseball field, where little league players play all summer, the evenings after the games I will walk over and pickup bottles and cans, it serves a few purposes, it makes the place across from my house cleaner(I pickup the bottles and cans, and other trash so I don’t have to look at it all day), and I make some extra money.
3) Collect pocket change, I have dish in my room when I come home I empty my pockets into it, usually 50 cents here, $1 the next time etc. When this dish fills up I once again put it in my emergency fund.
4) Sell things you no longer use or need – I usually sell a few things on Ebay, and once a summer I have a garage sale, this allows me to clean up the clutter in my house and make some extra money doing so. Once again the emergency fund gets a little boost.
If you have any questions about emergency funds please ask a question in the comments area and I will do my best to answer them.