Living within your means is the surest way to not fall into a bottomless pit of debt. But that means really taking your financial life by the horns and getting solid, stable control over your spending habits.
Budgeting isn’t just cutting back on your expenses, although that’s not a bad idea to kick start you in the right direction.
There are remarkably wasteful ways Americans spend their money – chief among them are: wasted energy bills, daily coffee purchases, premium cable packages, traffic tickets, lottery ticket purchases, unused gym memberships, tobacco, alcohol, gambling, ATM fees, expensive (unneeded) warranties, credit card interest, etc…
Some habits that are worth getting rid of:
1. Using out of network ATMs
2. Buying overpriced coffee every day
3. Using retirement money for extra cash
4. Not tracking your spending
5. Only paying your credit card minimums
Now that you’ve eliminated spending those extra dollars, it’s time to sit down and get into the budget. First, let’s take a look at how much you earn. That means everything, not just your weekly paycheck. Do you have any other streams of income?
Knowing how much you have to work with is an important part of this process. In addition to your monthly income, you should include any interest accumulated from savings accounts, retirement funds, financial investments, and so on. Account for your net income, not your gross. This is very important for budgeting correctly.
Once you’ve figured out how much you have coming in on a monthly/weekly basis, you can take a look at how much you’ve been spending. Pour over your bills. Take a look at your bank statements. Find every penny that you’ve sent out into the world. This should give you an idea of your spending habits.
Include your ongoing expenses, such as monthly bills with your home, groceries, child care, insurance costs, debt payments, and estimated self-employment taxes (if applicable). Anything that is non-essential needs to be incorporated as well. This would include holiday gift purchases, vacations, clothes, beauty, laundry, and so on.
Once you have a total for your expenses, subtract that from your income. If you have money left over, this is what can go into savings or pay more toward debt.
Nowadays there’s an app for everything. The internet is an awesome place for resources. There are several spending trackers you can use to help you with your weekly budgeting and management. Mint.com, HelloWallet, and Pocket Expense are a few good options to look into.
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