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.

It seems that although trying to report the facts, the news media is being told to keep a positive spin on the financial world, and focus on the positive as opposed to the negative when it comes to money matters.  Unfortunately, as the end of the year figures become public, there is no where for American’s to hide, we are in some serious trouble.  Unemployment statistics are rising each month, sales in all the major retailers are down, and people who have their money in the stock market are panicking and with good reason.  Yesterday, Barack Obama addressed the country talking about the financial crisis and said that Congress must act quickly to put a plan into effect or things are going to plummet.  I don’t think that Congress knows how to act quickly, and I also think that they are at a loss as to what to do.  I don’t know that the incoming President has all the answers, as a matter of fact, I don’t think that anyone does.  It is like when you overspend for years, and then you lose your job, basically we are up a creek.  All the bailouts in the whole world are not going to stop us from going into a Depression in this country.  You can’t just undo all the mistakes that have been made overnight, and no one should expect that from anyone including the new president.  The one thing that I know is that we need to start tightening the belts on spending all around.  There is no need for spending money like we do in this country, and it is really time for us to look at our “budget” which is far from balanced and stop spending money that we don’t have.  This country does not need small cutbacks, we need to cut back in all areas and start using the excess to knock down some of this debt that we have accumulated.  It won’t happen overnight, but working together with a clear understanding of the hole that we all collectively have created, means we start to put this horrible financial crisis behind us.

It may be a long haul for the American public, but we can all do our part.  Volunteer time, money or whatever resources you have to help others if you are not one of the one’s in need.  You could need help in the future, so keep in mind that what you put out there comes back to you ten fold.  We need to help each other, just like we did following 9/11.  We need to unite and show the world what American’s are made of, and it isn’t money.

Everyone understands that finances are tight and therefore many people are cutting back.  This does not necessarily mean to not buy presents for people but to be wise in what you buy.  Don’t overspend and try to keep gift giving simple.

In the past, I have always overextended for Christmas, coming out of the day in a hole and then spending most of January trying to get out of it.  I really thought that was normal, but this year, I stuck to a budget, and I can honestly say that I feel better going into Christmas than ever before.  I know that I still have a dime left and that I will be in good financial shape in the New Year.

People tend to over spend at Christmas, so that they can give to others, however, I can honestly say that I would not want a gift from anyone who was putting themselves in a hole to come up with a present for me.  I would much prefer a card or some cookies instead.  That would make me happier, and I am sure that no one on your list wants you to go into hock, just to present a cool present to them at the holidays.

Do yourself a favor, limit the gift giving to simple things, and what you will find is that you will enjoy the holidays much more than you ever have before.  I know I will.