Posted on 1/3/2014
With the dawn of another January, and credit card statements beginning to reveal the full extent of holiday shopping damange, now is the time when many Americans become serious about living within their means for the year ahead. Unfortunately, for many of us, spending decisions of the past mean we ahve some cleaning up to do before we turn the corner toward financial responsibility.
Avoid Darastic Changes
Before creating a budget for yourself, you need to know where and how you currently are spending. Invest the time to review your bank and credit card statements for the last regular month (not December, due to holiday spending), and take note of where your money goes. Adding up expenses in different areas will ikely reveal frivolous spending that can be cut down or eliminated.
Once you identify areas of fribolous spending, it is tempting to make a resolution to stop swiftly and completely. However if your frivolous spending habits are rooted deeply in your lifestyle, you may need to first take moderate steps to reduce frivolous spending, rather than eliminate it entirely. Just as you cannot go from couch potato to marathoner in a day, committing to a budget takes time, discipline and training. You may need to phase in your budget over several months in order to succeed.
Don't Forget Savings
it is difficult to save money while trying to cover current expenses and pay off existing debt, yet is it important to build up some savings to cover fututre financial catastrophes - which are inevitable - to aviod the creation of additional future debt.
If possible, consolidate credit card devt at a zero percent or low interest rate that will allow you to prioritize saving in the short term. You can then retire debt once you have $500 to $1,000 in your savings account for future, unforeseen needs.
Identify the Right Tools
To successfully transition to living on a budget, find the strategy and tools that you are ost likely to use. For some, the solution is to use simple cash envelopes. For others, a mobile app that tracks expenses by department is more appropriate. Budgeting is not "one size fits all," and there are various tools available for every personality type.
Don't Give Up
Unexpected expenses will creep up. Your best estimates may turn out to be wrong. You will find that you won't become a budget guru your first month. It takes time to understand everything that crops up in the course of a tupical budget month, and how to deal with those variables.
Whatever challenges, don't give up. Stick to your resolve, be flexible, and let your budget take on life of its own that reflects your priorities and goals for a financially healthy 2014.
This information was provided by www.indianabankers.org