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Budgets with a Focus on Saving- Email this article to a friend - March 2008 Class Review of Budget from Last class:Need versus Want. This is the tough talk with the family. Be prepared to argue and duke it out!! Some examples are high speed internet vs dial up. Basic cable VS Full package cable. Fixed Expenses. Those things that are a fixed expenses, they are priority. These would include: house payments, utilities, car and home/renters insurance. You do not mess with these payments- they are the most important and need to be paid each month. If you don’t have them taken out of your paycheck – then these expenses include heath, disability, and life insurance. Your goal financially is to treat your savings like a fixed expense. PAY YOURSELF FIRST! Variable Expenses are those things that you can manage and adjust as you go along- such as groceries, eating out, entertainment, cell phone, cable or the newest latest fadest things like new cell phone or i-pod, the full cable package. If you spend say $4 a day on coffee, or cigarettes, or lunch…if you stopped that you would save $100,000 in 20 years! That is a lot of peace of mind you are sipping , chewing, or puffing away! Emergency Savings. You need to have the goal to having at least 3 months (better 6 months) of savings to cover all your “needs” and expenses should you lose your job or incur major unexpected expenses. These are the funds that will keep you afloat and keep you out of trouble. This is better kept in a separate savings account than the savings account you have with your checking account. This is the money you use for unexpected car repairs, new tires, short term unexpected illnesses and medications. Use Envelopes. One technique is having envelopes labeled and money or checks for each expense for the month- “house payment”, “utilities”, “gas”, “groceries”, “car insurance” “renters insurance”, “Christmas budget”. Once you have spent the allotted amount for the month that is it. More on Budget and SavingsMake Savings a “Fixed amount” Treat your savings like an expense, just like a house payment. Your savings need to be “paid” each month, automatically, and commit to at least a certain dollar amount-even if it is $10! Don’t wait to save if you have extra money each month. You need to make a conscious effort and make it happen. Work on Bill Due Dates. Most collectors like credit cards, car insurance companies, utility companies will all let you adjust your due dates. You want to avoid having to pay all your bills at once, especially if you get paid every 2 weeks. When you do your reverse budget, also write down the due dates of all your fixed expenses and think about how they correspond to when you get paid. The idea is to pay a couple big bills and some smaller bills with each pay check so there are always some funds left over. This will allow you to see there is likely something to save each month even if it is $12.50 every 2 weeks ($25 a month will be $300 the first year and then bump it up to $50 a month and you will have $900) You have to start somewhere. Set money aside for Christmas and birthdays. Start now. You know it comes every year and you always wonder how you spent so much. If you divide the total amount you need for Christmas and birthdays over 12 months and put that much aside each month you will never go in debt over Christmas and birthdays. Consider setting up a separate “Christmas Savings Account” where you automatically have a set dollar amount automatically put into the account each month. Reverse Budgets Work. This is where you go over the past 2 months of bills (all credit cards, debit cards, and cash) to sort out where you have been spending. Divide by two to see your average monthly expenses. (There is a budget worksheet online for you to use. Click here.) This is a great way for you to see where you have been spending and put your fixed expenses into the worksheet and then put in the flexible amounts in a different color so that if something needs to be adjusted you know where to start (with the flexible/variable expenses) Write out the due dates for each of your bills. If you have everything or the big expenses all at the first of the month call those creditors and ask for a mid month billing- insurance companies, utility companies and credit card companies will do this, you just have to ask. How To Save and become Financially SecureThe goal is to live off 70% of your income!! It does not matter what the income is….that is the goal. If you can do that you do not have to worry about budgeting!! You save 10% for long term savings, 10% for emergency savings and 10% for your giving fund. That is how people become financially secure. This calculation is the same whether your household makes $30000 a year or $1 million the rules are the same. Long-Term Savings. You want long term savings where you do not need that money for 5 years or longer. This is the money in mutual funds or CDs or longer term investments. This is where you get Uncle Sam to work for you. You buy a home and build equity over time and pay less in taxes. Where you match your employer’s contribution for a 401K. These are all things you really should be doing . Anytime you can pay less taxes and the save money for down the road you should. Types of Tax deferred Savings:
This Class was given by Connie Slater and Todd Colgan of State Farm Insurance. If you would like assistance with your savings or have any insurance needs or questions please feel free to contact their office: Connie Slater Insurance Agency Inc Class offered by If you like this article and would like to receive more valuable information like this, Click here to sign up NOW! |
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