Archive for the ‘Budgeting’ Category

6 Ways to Save for the Holidays
October 12, 2009

During the holidays, it is so easy to get caught up in the spirit of the season and to overspend. So, here are my top 6 tips for planning ahead to stretch your dollar this season.

  1. Start Saving Now. How many paydays do you have until the week before Christmas? How much will you be able to save out of each one? Add that up to determine your cash budget. If you already have planned ahead with a Christmas account, good for you! Add that to your cash budget. This total represents what you can afford to spend without going into debt.

Resolve Not To Use Credit. How many times have you started a new year with debt from the holidays? Now is the time to steel yourself against impulse purchases, guilt gifts, and gifts for yourself. Make 2010 the year you don’t carry debt forward.

Make a gift plan (budget). How much will you allocate to each family member or friend? Divide up your funds so that you know exactly how much you can afford for each person. You may really want to buy your brother that new Blu Ray player, but can you afford it? Or should you be looking for something less expensive? Thinking through these purchases will really force you to stick to your budget.

Shop Smart. The key is to either shop early or shop last minute to get the best deals. If you can start early, you have the luxury of time, and can shop online. Google for coupons, and look for free shipping. Make sure to cross items off of your list as you find them.

Make Personal Gifts.  Typically less pricey than buying something, but it is appreciated just as much.

Make A New Gift Giving Tradition. This might be the year that you propose the adults in your family draw one name to buy for. Don’t be shy to suggest new ways to celebrate the holidays with your family. Now is the time to make these plans, though, before everyone else starts their shopping.

I promise that if you act now, you will spend less money and lose less sleep over the holidays.

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7 Saving Tips for Back to School
August 11, 2009

So, school is right around the corner. If you are like most parents, you are probably trying to stretch your budget to get everything you need. Here are my 7 tips for saving money for back to school.

Shop at home: It wasn’t so long ago that school just ended. Chances are, your child brought home a hodgepodge of supplies at the end of the year. Comb your home to see what you already have on your school’s list. Check those junk drawers, and you will be surprised how many things you have already.

Shop early or shop late: These are the best times to save money. Now that school is upon us, you can find items moved for clearance. Prices will continue to go down until and after school begins. Although the must have brand name items may be gone, what’s left will be cheap.

Stick to the list: Your child will want specialty items. Keep to the essentials.

Set a budget: You can typically get everything you need for $25. If your child wants a higher priced item, negotiate on another item to stay in budget.

Don’t buy fall clothes: The stores may have jeans and sweaters on display, but you won’t need those items for several months. By then, they will be on sale. Remember clothes are seasonal: Don’t get sucked into a new fall wardrobe just yet. We won’t feel cool or cold weather for awhile.

Buy summer clothing cheap: Pick up clearance summer items in a size that your child could also wear next spring.

Save on the basics: Now is the time to get deals on short sleeve t-shirts and other basics that can transition to fall. These items are close to the cheapest they will be all year.

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Is Now the Time to Refinance?
July 30, 2009

The radio is full of commercials offering 4% interest rates, no closing costs, and many other dream offers. But there are some things you should know. First of all, not surprisingly about 90% of advertised lending offers are only for those with PERFECT credit, PERFECT home values, etc. The reality is that we all know if it sounds too good to be true, it is.

So, where should you start?

Do the Math. Figure closing costs and overall savings. There are always closing costs and someone has to pay for them, most likely you. This will be several thousand dollars. If a new loan is going to make sense, then you need to be in the house longer than it takes to break even on those costs. For example, you are initiating a new loan, which will save you $200 a month, and your closing costs are $3000. It will take you 15 months to break even on those costs. Does that make sense? If you finance those costs into the loan, it will take even longer due to the interest you will pay. Click here for a refinance breakeven calculator.

What is your real savings? Your lender should be able show you what your real interest totals. Compare this to what you have left on your current loan.

Are you extending the term of your loan? If you only have ten years left on your mortgage, and you are refinancing for another thirty years, is this your best option? If you are close to retirement age, then extending the loan may not make sense. Take a look at your overall financial goals.

Are you financing old debt into the new loan? While rolling credit card debt into your mortgage can help with short term cash flow, are you committed to making the changes in your life to make sure that the credit card debt doesn’t accumulate again? Over 70% of the people who consolidate their debt end up replacing that with new debt.

Do you trust your lender? There is a huge increase in refinance and loan modification scams. In fact, the FDIC has new literature out just to address this issue. You can find out about the common scams here. At the end of the day, you should understand your new loan so well that you could explain it to someone else. When you do, you may realize that a refinance just doesn’t make sense right now.

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Overcome Budgeting Obstacles
July 9, 2009

We have all heard the old quote: “Success is a journey, not a destination”. This definitely applies to budgeting. When we teach people how to budget, our team often gets the same question … “I have tried to budget in the past, but it didn’t work. What am I doing wrong?” Many people have tried different types of budgeting techniques, only to abandon them quickly.

Use discipline. A budget does mean prioritizing your spending. For some, this is very difficult at first. You will find that it gets easier as you do it often. When you find yourself tempted to purchase something you don’t necessarily need, but you decide against buying it and instead pad your emergency savings account, you will have succeeded with this step.

Be patient. Just like a diet, don’t expect to get it right the first time. Setbacks are normal. I recommend that you set up a monthly budget, and create a spending plan for each week of that month. If you find that you can’t stick to it weekly, then create a daily plan. Click here for these resources, or click on the resource tab of this blog.

Play as a team. If you are married, then expect the process to take longer than if you were single. You each have your own spending personalities and needs that will affect your decisions. With a new household budget, you should have weekly meetings to discuss the budget. This may seem like a lot, but it is important to get into the habit. Once you find that your budget runs on auto pilot, fewer meetings are needed.

Depending on the goals and objectives you set, your journey will actually not end for many years. Managing your finances is a lifelong commitment. Remember to enjoy it, keeping your eyes on the horizon because, believe it or not, you will get there. It may not be easy, but (get ready for another cliche) … nothing worth having ever is.

Start A Budget
July 7, 2009

At Essential Knowledge, we actually don’t use the word “budget”. We think spending plan is more appropriate. It seems less confining, and more empowering. Whichever term you use, the result is the same. A budget is a plan for your money. And the amount of money you have is not important  whether your bank account has millions of dollars or tens of dollars, having a workable solution for spending is critical.

How do I start? Well, you can’t know where you are going, unless you know where you have been. You can do this one of two ways … you can start tracking your expenses for thirty days; or, you can pull up your most recent bank history online, and do a thirty day review. Use this expense worksheet for free. List every expense in the right category. Total each category to see your total spending. You probably know the exact amount of your car payment and housing, but you will probably be surprised what you spent in other areas.

Does your income exceed your expenses? This seems like a silly question, but it is vital. If it does not exceed your expenses, then you are probably using credit to cover the difference. Your immediate goal should be to cut your expenses in order to cash flow each month.

If your income does exceed your expenses, then decide what you want to accomplish. Do you want to save more money? Do you want to be more disciplined each month? Are you starting a retirement account, or adding to one? Determine what you want to save each month, based on the goal.

Evaluate your spending. You will see some things that you absolutely need, such as food, healthcare, housing and transportation. You will also see things that you just wanted, such as 150 channels of digital cable. The key is to find what you really need, and compare that to what you really want. Obviously, you need to eat, and have a roof over your head. But, could you live somewhere less expensive, or take your lunch to work?

Start with the easy things. Accomplishing small steps is satisfying and will motivate you to do more.

Each month, look for ways to save money in your budget. You will be amazed what you can do, regardless of your monthly income. Check back with me, too, for other ways to save.