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Balancing Your Budget Effectively for 2013

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In this day and age, a majority of the population are trying to achieve the same goal – to be debt-free. With unemployment rates rising, achieving financial stability seems pretty impossible to the average person. With that being said, many people are relying on credit cards to get them through and pay the bills on time – but in turn, are digging themselves into a deeper pile of debt.  According to the Credit Counseling Society, January has consistently been the busiest month of the year for business (debt consolidation), but this year, their numbers reached its highest in history. The reason behind this is that, the majority of consumers are making it their top priority to reach financial freedom.

How to Implement an Effective Monthly Budget

Due to increase in debt consolidation and consumer involvement in their finances, many non-profit organizations, as well as financial institutions, have been offering consumers free financial counseling and debt management services. Agencies such as the Credit Counseling Society receive over 5,000 monthly calls in light of what some call a global epidemic. In light of this financial crisis, people are left with almost no choice but to create and stick to the most effective and logical budget possible. As the month of January has always been known to be more of a wake-up call for people when it comes to their finances and spending, it is also the time of year that budgets are more beneficial – as you have the entire year to reap the benefits. It is almost like a diet, budgeting your lifestyle to eliminate the unnecessary baggage and costs. In order to create an effective budget you must incorporate everything from monthly food expenses, mortgage payments and utility bills to unexpected expenses that may arise at anytime.

Elements that Can Affect Your Monthly Budget

Compare your mortgage debt to your other expenses. On average, a consumer has approximately $39,000 in revolving debt at any given time; this does not include mortgage balance. With the rise of taxes, even the mortgage debts have increased substantially over the last few years, increasing the debt to income ratio and throwing the economy even more off balance. These are just a few of the reasons that make creating a budget vitally important. Here are some tips to help you achieve a successful budget without distractions:

Tracking Expenses – The best place to start tracking your expenses is by outlining a minimum of two months ahead. Be sure to include all recurring expenses such as mortgage/rent payments, utility bills, cellphone bills and car payments. Since the majority of these expenses are set in stone, this will give you a better idea of the expenses you have each month that do not change. Once this is complete, start to add in the variables such as food expenses, entertainment, and privileges such as cable, leisure and luxuries.

Take a good look at you rough numbers. Many people choose to have a miscellaneous category that they add to their budget which covers odds and ends that they spend their money on. While this is not the worst aspect to utilize, it will make it a bit harder to pinpoint where you can trim costs. You should also take into consideration the expenses that only accrue during seasonal months such as summer vacations, holiday gifts or weddings. For this you may have to utilize one of two options:

  1. Create a long-term one year budget. This may be quite time consuming and is not the most accurate outlook since expenses tend to change considerably.
  2. Account for an additional amount each month to be used as savings or rollover funds. This will help you account for the unexpected or seasonal expenses without throwing off you budget.

Always Keep Your Goals in Mind – Once you can account for exactly where your money is being spent, you will be better able to define your financial goals. Whether your goal is to become completely debt-free or to save enough to reach several goals such as vacations or expensive novelties – having a clear definition of what you want to do with your money will help you achieve the freedom you desire. You will be surprised as to how many goals you can complete by saving just $20 extra each week.

Implementing Budget Cuts – While it may be hard at first, learning how to swallow one’s pride and start cutting back on unnecessary expenses can make a world of difference. After you have a healthy understanding of your goals and a near accurate map of your monthly expenses, take a deep breath and go over each item, one by one. Looking at each expense carefully, ask yourself how much money you can realistically cut from each. Can you eliminate anything completely? On average, this system enables consumers to trim a few hundred dollars, in most cases, from their monthly debt. By using the savings to pay off other debt will help you achieve your goals at double the speed.

Motivation is Key – Financial freedom does not happen overnight – even when you hit the lotto. Especially if you are forced to pay things down rather than pay them off entirely. This is where motivation and determination play a vital role. Conditioning yourself not to overspend will be a daunting task. Being frugal with money, especially when you have some set aside can be one of the hardest aspects of life – but one that is well worth it in the end. Try a buddy system. Each week (or month), have someone you trust check over you spending. This will help you stay on track.

Article source: theprovince

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