Financial Spring Cleaning

Tulips are beginning to poke their heads up through the soil. Fruit trees are performing their best flower show. Birds are chirping and the auburn sunset gets later every day. Spring is in the air. For many, this also means that it’s time for some spring cleaning around the house. Why not expand that “out-with-the-old, in-with-the-new” mentality to your money? * * *

Get rid of those old bad spending habits and start fresh with new budgeting skills. Before you know it, your financial savvy will be in full bloom just like those Bradford Pear trees outside my window.The main reason people put off setting up a budget is because they think it’s too hard. It does not have to be a sacrifice if you take simple steps. In my opinion, the only way a budget will work long-term is if it isn’t too much of an inconvenience. Find a way to budget that will fit your lifestyle. Here are some easy ways to get started:

1. Use a Calendar: Use a calendar to write when money is coming in (pay, retirement, etc.) by date, and write down when bills are due as they come in. Mail payments at least one week before the actual due date to avoid late fees or pay them online. I get paid every 2 weeks and find it easier just to pay all of my bills on payday that are going to be due before I get paid again. That way, I just pay bills every 2 weeks and everything always gets paid early.

2. Track your spending: Use a tracking sheet to write where you are spending all of your money. Write down all cash spent by the category in which it is spent. (When using a check, write in your checkbook how money was spent.) Keep your tracking sheet at home, in your car, or in your wallet – keep it where you will use it. It may be easier to use it daily than to try to remember what to write later.

3. Develop a Spending Plan (Budget): Use a simple form with columns to help plan your spending. At the beginning of the month, use the first column to write planned spending. Once a week, list in a column what you really spent using the amounts on the tracking sheet and in the checkbook. At the end of the month, subtract the amounts spent from the amount planned. A difference is normal – seeing it helps make planning decisions. Use a spending plan (budget), to decide and list where to spend money. Plan for expenses that do not occur each month by taking the yearly cost and dividing by twelve months, then list it on your monthly spending plan.

4. Savings Account Ledger: Use a savings account for periodic expenses to save in your spending plan: A) Set aside money each month for planned expenses like car tags and clothes. For example, to plan $300.00 per year for car maintenance, divide by twelve: plan to save $25.00 per month. B) Save money for emergencies. Set an initial goal of one month's income and then build from that point (three to six months recommended). C) Save money for goals: a new car, a house, a vacation, or college. D) Save money to make long-term investments for the future. Just by making a few small steps, you can learn much about your spending habits and where you may be able to cut back. There is no better time to shed those bad money habits and start clean with a new budgeting attitude.

Spending 101

When you spend more money than you make each month you are bound to have money problems very quickly. The bad part is that most of us never realize we are spending that much until it's too late. It is important to know what and how much your 1) major expenses are, as well as 2) keep tabs on minor spending as well.

How many times have you used the credit cards to buy a TV, school clothes and supplies, fixed the car, or any number of things and not realized that you just exceeded your monthly income. It is important that whatever you put on a credit card will NOT exceed your total monthly income. You may have even realized it but thought there is always next month.

Credit cards are the biggest culprit but they aren't the only way to spend more than you make. Things like payday loans or car title loans also come to mind. Paying $15 to use $100 for a week doesn't seem too bad. However, when you consider that you are paying almost 400% in interest over one year these loans make interest on credit cards look like a great deal.

Normally, installment loans have a lower interest than either credit cards or payday loans but they can still cause problems if you aren't positive that you can make the payments each month. In my opinion, a house payment and the purchase of a car the only real legitimate reasons for paying interest. If you use your credit card for necessities other than shelter and transportation, i.e.: food, paying other bills, etc. please make sure not to pay interest on those items by paying them off in full at the end of the month. I understand that very few people have the means to make these purchases with cash. However, being conscious of the spending on the major and minor expenses will help you gauge if you are going over budget.

One last thing that I make sure I remain true to day in and day out—not living beyond my means…There is something to be said about living a "simple" life—and I am not talking about the show with Paris and Nicole J. We are too concerned in our country with "keeping-up-with-the-Jones'". It is important to not live your life by trying to impress everyone else, but rather living a life and a lifestyle that makes you comfortable.

If you aren't careful you can still get yourself into trouble by buying or renting "more" house that you can afford or having car payments that don't fit your budget. Live within your means and you will be a lot happier and be able to NOT spend more than you make…