Budget Help Personal Money Management
Avoid Money Management
- NO SPENDING PLAN. The "where
does the money go?" question frequently comes up because
of spending on a day-to-day basis, without any sort of plan for
care of needs and wants. Here's where a money management program
can help you
spend your money wisely, to reach your goals.
First, set up priorities: know your regular expenses;
determine what your goals are in relation to short-and long-range
aims. Take critical look at your expenses and weed out those that
don't give real satisfaction.
- NO CASH RESERVE. Financial experts recommend that every family have a cash reserve of
at least 50 percent of their annual income. To acquire this means
developing good saving habits and self-restraint in spending. There
is a definite need to save so you have an emergency fund when unexpected
Knowing you have a safety margin of savings will also
give you a feeling of security and greater peace of mind. And don't
forget a savings account enhances your credit standing.
TOO MUCH USE OF CREDIT. Using
credit can be a real help or a trouble spot. depending upon how
you use credit. The biggest problem usually is that families
overextend themselves and become committed to larger payments than
Credit terms differ, too. Shop carefully for credit--as
carefully as you do for goods and services. Be sure time installments
fit into your budget and don't take on more than you can handle.
Know the cost of credit terms. The real cost. Keep track of
expenditures made with charge accounts or credit cards, so
the bills won't come
as a big surprise to you. And pay on time to keep your credit rating
- NON-CONSTRUCTIVE USE OF WINDFALLS. You receive a tax refund, a bonus or raise,
perhaps an inheritance. Most families are inclined to spend the
extra money on luxuries they wouldn't ordinarily consider. And
poof, the money's gone.
There are many ways to put "windfalls" to
constructive use. Add pay raises to your savings before you get
in the habit of spending the extra money. Use refunds or bonuses
for needed large purchases, such as major appliances. You'll also
save paying out interest charges.
- NO PROVISIONS FOR LARGE EXPENSES. We all have large, predictable obligations that come due at irregular
intervals during the year. A large, forgotten insurance premium
or tax bill can cause financial chaos if you've neglected to accumulate
Take all your big items and divide the total by 12.
This 1/12th should be reserved every month against the time those
bills will be due.
- UNDERESTIMATING THE COST OF OWNERSHIP. The
original cost is sometimes not the only cost of ownership. This is
especially true of an automobile. Many of the costs are obvious
but some get overlooked until we collide with them, head on. If
a car is bought on an installment basis, monthly payments are just
a small part of the cost of operating it. Figure on all the costs.
Operating expenses are: gas and oil , repairs, maintenance, tires,
insurance. Other costs include registration, license, parking,
tolls, etc. In addition, a new car costing $11,000 depreciates
in value by about $2,500 during the first year. While depreciation
is not an out-of-pocket cost, it does become one when the car is
traded on another one.
- SPENDING LEAKS. Impulse
buying--frittering away small amounts here and there on "little" things--can
add up to a surprisingly big amount. Write down every cent you
spend for a week and take a good hard look at your spending "leaks." Then
try to control these trouble spots.
Avoid shopping for groceries when you are hungry. You'll
buy more of those tempting goodies that can run up your bill.
Avoid "killing time" in department stores.
(You're sure to come away with something you hadn't planned on
buying.) Use an allowance and keep within it. Once you can resist
the temptation of spending "small" amounts, you'll have
more money for the things you really want.
- CARELESS SHOPPING HABITS. There are always pressures on us to buy things. Our wants are greater
than our needs. And advertisers help exert this pressure. This
leads to purchasing things we don't really need and to buying without
comparing values and prices.
Before you buy, know the dealer and the store's reputation.
Read labels, understand warranties and contracts. Avoid pressure
tactics by salespersons.
NOT SAVING SMALL AMOUNTS. Don't
be discouraged if the amount you can save looks pitifully small.
Believe that little acorns do make big oaks. Ten dollars saved
every week will be more than $1,000 in less than two years.
Does that seem a long time? It will go faster than you can imagine.
Remember how quickly the past two years sped by?
- CAN'T WAIT ATTITUDE. This
money management mistake hits young people the hardest. And is
the cause of much unhappiness. They often want to start off at
a level that it may have taken their parents twenty-five years
The "great American dream," as portrayed
by movies, television, and magazines, is beyond the financial
reach of most families and is never reached by overusing credit.
is needed is more of a "save now and buy
later" approach. Plus, a money management plan to help get
the things wanted as soon as possible.
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