Friday, July 11, 2014

Five Tips for Effective Financial Budgeting

1.  Consolidate loans and credit card debt
Paying bills is easier when there are fewer bills to pay. Everyone knows that, but what bills can you consolidate? You might be surprised. Obviously, student loans can be consolidated, as can personal loans and charge cards, but there are cases when it can be a good idea to consolidate other types of debt as well. Consider a car loan for a moment. Let’s say you have $5000 left on the loan at 5% interest, and you have the opportunity to consolidate that and a few lingering credit card bills into a 2.5% home equity loan (obviously, the interest rates here are only for example, and do not reflect actual available amounts) You’d be a fool not to bundle them all together for the lower interest rate, and a single monthly payment!

2. Avoid spending excess money on whimsical things
Tsotchkes may be fun to say, and who can resist those adorable smiling animal faces, but if it collects dust and does nothing more than take up space, not even rewarding your purchase with residual collector value, then why bother? They’re budget busters, and don’t give you anything in return! If you want to spend money on something whimsical, treat yourself to a five-star restaurant now and then, but don’t clutter up your home and deplete your budget for junk!

3. Cut back on unnecessary expenses
Unlike the last section, you’ve probably wondered how to go about doing this yourself, but may not have known how to get started. Well, think about what you pay for but don’t use- Things like gym memberships, online subscriptions and even weekly newspaper subscriptions may not pay off the way you thought they would. It’s a proven fact that very few gym memberships are utilized as they should be, and some people who are paying for those memberships never go at all! You should also look at your cell phone plan, cable television, and magazine or newspaper subscriptions to make sure you’re getting your money’s worth. If not, then it’s time to trim them back!

4. Be realistic with what you spend every month
It isn’t always realistic to budget the way you should. In fact, just one unplanned weekend trip can throw your budget for a loop! When you make up your budget, be realistic about it. Do you have a $10 per day smoking habit? Coffee? Bad habits have to be budgeted as well, even if you don’t want to admit that you have them. Think of it this way: If you budget accordingly, and you face your debts as you do your demons, then you might well have a better chance to kick not only the habit, but also the amount you spend on that habit. You also need to be realistic, though, in knowing how much you spend on gas, on entertainment, and on those other expenses that have you saying “aw, what the heck…” Many times, these are the little extravagances that you overspend on.

5. Make room in the budget for entertainment
Like the previous point, making a proper budget means taking a measure of how much you spend on your entertainment. You might include the expense in with vices, but generally it’s a better idea to keep those things separate. After all, you want to have fun, don’t you? Well, this is where it happens! Keep the money for nights out at restaurants separate from the grocery budget, and give yourself enough in this fund to stay entertained, but then not so much that you don’t have to practice some restraint when you’re out with your friends.

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