Thoughts On Finance

One of the biggest keys to successful financial structure is to put in place a budget and stick to it.  A budget is the best way to get a grip on your spending and making sure that your money is being used in the way that you want it to be.  Life on a budget is a necessity and so if you haven’t been living on a budget, there is no time like the present to get started and the following information may be helpful in getting started.

Creating a budget generally requires taking the following three steps.

1.  You must track your spending to figure out your current spending patterns.  You can’t change what you don’t know about.

2.  You must evaluate your current spending and set goals to take into account not only your day to day living expenses, but also your long term financial goals.

3.  Continue to track your spending to make sure that it is within the guidelines that you have laid out for yourself.

PITFALLS TO WATCH OUT FOR

Cash leaks.  If you are spending money and you don’t know how much or where it went, then you have a leak.  In general, if you are well budgeted, then you should be able to predict how much cash you need to take for the week, and that should be it.  There should not be constant runs made to the ATM machine or bank, this shows that you are not budgeting effectively.

Spending More Than You Have.  This is a common problem in most households, but you really need to come up with a reasonable budget and then stick to it.  Overspending causes debt, and once debt takes over, it can be difficult if not impossible to overcome, so don’t fall into the trap of spending more than you make.

Don’t Confuse Luxuries With Necessities.  Understanding the difference can be the key to making a realistic budget.  Cable TV, cell phones, internet service and fast food, are not necessity items, even though many people try putting them in that category.  It is important to not try and fool yourself into thinking that you can’t live without these items.

Don’t Count On Windfalls.  When you are figuring out how much money you can live on, don’t include in your budget things like bonuses, tax refunds, or investment gains.  The extra money from such items may be nice, but shouldn’t be figured into your income.

Watch Out For Spending Creep.  This is what happens as you begin to make more money, you begin to spend more money.  You are much better off sticking to the same monthly budget and putting the extra income into your savings.

I agree that the financial situation is looking kind of grim, but is there really anything wrong with American’s cutting back on their lavish lifestyles a little bit.  Let’s face it our lavish lifestyles is what other countries can’t stand about us as we spend and spend to have the biggest and the best, while in other countries their people are lucky just to have clean drinking water.  Isn’t it really the truth? I mean if you were the one struggling to keep your family safe from the toxins in their all so necessary water supply, would you not be just a tad resentful looking at American’s complaining about their new plasma TV’s? And what about the poor in our own country, don’t you think that the homeless are a bit resentful as we complain about the price of things but we are still running to the mall to get our kids designer clothes.  I think that as American’s it is time to accept the fact that what they say about us is really true.  We spend money like it is water and most of us have been spending more than we have been making for a long time now.  I am from a simpler time I suppose and really don’t mind cutting back a little, actually I am somewhat grateful for the cut backs that I have been forced to make.  I think it makes me appreciate the fact that I live a relatively simple life, with very little debt and money owed.  Sure I am not saying that if I won the lottery tomorrow that I wouldn’t enjoy it, I surely would, however, I think that living a simple more primative life is more my style and it really does make me appreciate all the non-material things that I have in my life.  So what if I can’t eat out all the time or take my kids to the movies but once in a blue moon.  I guess we will just have to enjoy watching DVD’s, home cooked pop corn and a Saturday night family game of Clue or Monopoly.  A simpler life doesn’t have to be so bad, just look at saving money as a challenge that you are willing to accept.  There are things that you can do to not only save money, but also to help the environment, but the question truly is are you willing to give up your lavish lifestyles, or are you willing to go down with the ship? Consider this your thought for the day.