Budgets and Money

Freshening Up Your Finances and Budget

Seventy percent of families in the U.S. are not prepared for a financial setback. Fortunately, it's not too late to employ good money habits and form a working budget.

Financial Spring Cleaning: Living on a Budget in 10 Easy Steps

Did you know that fewer than 34 percent1 of Americans are prepared for a financial emergency, even one requiring less than $1,000? Living paycheck to paycheck, 70 percent of families are ill-protected against inevitable setbacks.

Fortunately, it's never too late to develop good money stewardship habits - even if you haven't had the best experience with living on a budget in the past. In this article, you'll find 10 simple tips to kick off your financial spring cleaning.

  1. Identify priorities and get on the same page.

    Money issues are the number one cause of divorce according to a study reported in the Family Relations Journal. People lean towards spending either for status or for security. Identify individual priorities and commit to working out a stewardship plan that meets your goals. Make a budget everyone can sustain for the major areas like savings, insurance, college funds, retirement and estate planning.

  2. Track spending and earnings.

    First, find out where your money is going. Track every penny spent or earned for the next 30 days, using an app or small notebook. When you see it in black and white, it is harder to ignore overspending, debit and under earning. And, you may discover how well you are doing in saving and investing.

  3. Own it.

    Now that you know the facts, don't waste energy worrying about the problems. Take responsibility for where things stand and determine what needs to happen next. No shame or blame required, just squared shoulders and clear thinking.

  4. Take control.

    Every adult in your household likely contributed to how things are, and therefore, each has a part in making better money decisions going forward. Each person should identify and write down the changes he or she is responsible for.

  5. Change in 22 days.

    Change does take time but it can be faster than you think. For the next 22 days, pay only cash and reduce spending. Practice living on a budget. Soon you will have woven good stewardship habits into your routine.

  6. Pay yourself first with savings.

    An automatic savings deduction provides a tangible reward for your hard work and cushions against unplanned expenses. Make it a priority to open and maintain an emergency fund that is only for true emergencies. Consider making your emergency fund somewhat difficult to access. This may buy you time to evaluate if the situation is really an emergency or simply an impulse buy.

  7. Manage resources.

    Educate yourself about financial management tools like budgeting, projections and financial planning. Brainstorm how to repair, reuse and recycle items to delay replacing them. Don't always buy new.

  8. Be true to your principles.

    Have faith in your ability to become good money managers. Remain true to your best principles, including honesty in everything you do. Seek out professionals who have integrity and avoid fast-talkers who promise a short cut to wealth. Hard work and good habits will pay off.

  9. Learn the risks.

    All financial decisions contain inherent risks. Learn what the risks are and decide what you can live with. Mistakes will happen, however, educated decisions can prevent financial catastrophe.

  10. Keep it simple.

    Dr. Thomas Stanley's The Millionaire Next Door2 revealed how ordinary people like plumbers and police officers accumulated a net worth of more than $1,000,000. If nothing else, protect your family's future with these tips:

    • Save up a prudent reserve to guard against the inevitable emergency.

    • Don't borrow, ever. Pay cash and live within your means.

    • Don't pay top dollar for anything. Look for good quality at modest prices.

    • Educate yourself about sound financial investing.

The bottom line: You don't have to be part of the 34 percent who are ill-prepared for financial emergencies. You don't have to live from paycheck to paycheck. With some proactive financial spring cleaning, you can make a budget, develop and emergency fund and get your family's financial plan in order.

1. http://www.marketwired.com/press-release/one-in-three-us-adults-has-no-emergency-savings-despite-improving-economy-2005436.htm
2. http://www.thomasjstanley.com/pub-books/1/The_Millionaire_Next_Door.html

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