Managing your money isn’t necessarily adopting a completely frugal lifestyle. It’s really a state of mind: recognizing that every expenditure is budgeted for and that your responsibility is to honor that budget. The key to money management is accepting the principal that you don’t get to spend every dime you make, every month. Planning is the magic that makes it happen.
• With that in mind, the first rule in money management is living within your means. It’s not that difficult; what it does require that may be difficult at first is working up a realistic budget.
• Budgeting has to be more than a monthly affair; it’s got to contain recognition of your yearly cycle. Christmas, summer vacations, and tax day can all require major expenditures. You have to plan for them: your two choices are saving for them or buy what you need for them in small bites. You can’t do that with taxes, but you can buy Christmas gifts all year and July plane tickets in March.
• Buying major items is inevitable, but buying on credit is not a good habit. It will cost you thousands of dollars a year if it’s a monthly habit. If you must go into debt for a couch or a car, plan to build the payments on those items into your budget and try to shorten up somewhere else in the budget, other than the savings account.
• When you’ve come to grips with a spending plan, it’s time to develop a savings plan. Once again, it’s not a change of lifestyle; start small, but start. Open a savings account and make it a payday ritual to plunk something in it. The number is up to you, but consider the account untouchable once you’ve put something in it.
• Use the tools at work to set money aside. You can open an IRA or a 401K and pretax dollars will be taken out of your paycheck every two weeks to be put aside. After a couple of months, you won’t even notice it’s missing. If it puts a real pinch in your budget, it’s probably too much. The idea is not to live in poverty; it’s to live a little more efficiently.
• Don’t fudge on your tax deductions. You don’t want to be writing a check on April 15th, so don’t succumb to the temptation of bumping your deductions in order to gain a few more dollars in each paycheck. It will destroy your savings plan or force you to pay interest on the money you have to borrow to pay the IRS.
• The best way available to most of us to put our money to work is by owning a home. Just how to accomplish that goal is a question whose answer becomes more elusive every year. Today, it’s a planning process – or rather, a savings process - of several years. Assume you’re going to need at least ten percent down in order to maximize tax benefits, and work towards that goal with your savings tools.
It’s important to understand that we learn to manage our money. It’s learning to use new tools and breaking old habits. It won’t happen overnight; you should consider it a long term goal. You should also consider the payoff significant; so keep your eyes on the prize. There is nothing like the security of a comfortable monthly budget and money in the bank.
Mortgage Lenders Plus.com is an advertiser supported mortgage directory. Get second mortgage - mortgage refinance content delivered straight to your desktop daily.
|
|
