With the current wobbly economy many Americans find themselves living paycheck to paycheck. People seem to think that if only they made more money their financial woes would be solved. Unfortunately, unless you actually plan out your budget and stick to it, it really doesn’t matter how much money you make, you are still going to encounter the same problems. That’s why whether you make $25,000 or $125,000 you need to plan your finances so that you get the most out of your income.
1. Collect all the data and put it on paper.
You may need to dedicate and entire day to this task depending on how messy your finances are. Simply collect all your financial data (income, credit cards, accounts, IRA, expenses, etc.) and put it into two separate charts. The first chart will include all of your income: salary, side business, and otherwise. The second chart will list off all of your current expenses. You can also use free financial websites like Mint.com to help you see exactly where your money is going.
2. Cut unnecessary expenses.
Do you really need an expensive gym membership? Can you cut some of your electricity and water use? The truth is that many times we are paying for more than we actually need. Find out where you can make some cuts and adjust accordingly.
3. The 60% Budget
A popular budget is the 60/40 theory. That is to say, 60% of your pay goes toward expenses and the other 40% goes into savings. You will be surprised at how easy it is to cut your expenses to 60% of what you make. You will also be surprised at how quickly your will savings grow.
4. Have some sort of secondary income.
Many financial experts will tell you that depending on one income is not enough. For this reason, you should start finding ways to make some extra money on the side. The Simple Dollar has an entire list of businesses that you can start on your own.
5. Keep your accounts simple.
There really is no reason to have multiple checking accounts unless you have a separate account for business expenses. With multiple accounts and no organization you will have a hard time keeping up with everything and may not even be able to track how much you spend.
6. Leave the credit card at home.
My credit card is locked away in a desk and only used for emergencies. If you are living on a tight budget there is no reason to add expenses to your credit card. Additionally, there is also no reason to have multiple credit cards at once.
7. Buy used.
Besides helping the environment and local business, buying used can definitely make a difference in a financial situation.
8. Cook your meals at home and brown bag your lunch.
Nothing puts a dent in your wallet more than eating out. Cook most of your meals at home and brown bag the leftovers for lunch, this way you save money and may even lose some weight.
9. Get rid of the landline at home.
A cell phone is more than enough to take care of your communication needs. You are probably already paying for nationwide long distance on your cell, so there really is no reason to have a landline at home.
9. Check out books from the library and rent DVDs.
Borrowing things is much more cost effective than buying a bunch of things you don’t actually need.
As you can see, if you are living on a tight budget there are several steps that you can take in order to avoid debt. With careful planning and perseverance, you will see that even $25,000 can go a long way.
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