How to Manage your Personal Finances

Given our country's current troubled economy, it's even more important now than ever to carefully manage our finances. Many people today not only spend more than their incomes, or even don't know what they or their spouses are really spending. We are living in a time of high unemployment, and working families ending up homeless or at a food bank because they aren't able to make ends meet. We don't need to live in fear, but need a true view of our financial reality so we can plan for it. I fully believe in hoping (and praying) for the best and preparing for the worse. Just as you have to prepare and plan for a hurricane that is headed your way, we can prepare for a troubled economy and other emergencies that may head our way. As long as you have done all the planning and preparing possible, you can relax and enjoy life.

ANALYZE CURRENT FINANCIAL SITUATION:

Before you can even set up a budget, make plans to eliminate debt, and plan for savings; careful analysis of your current situation is required. This is a very important (and not always fun) step to undertake. If you already use personal finance software such as Microsoft Money or Quicken, you will be able to easily retrieve these items through by pulling a few reports (Income and Expense Report and Net Worth Report). I personally use Microsoft Money, but my husband prefers Quicken. I would highly recommend picking up one of these software packages the next time they go on sale. If you don't use a package like this you can use this budget worksheet to document your current standing. It is good to analyze the past year of spending to include seasonal spending differences, such as Christmas gifts and fluctuations in utilities costs. In this step you will be identifying and tracking all income, expenses, debt, and savings.

You now have a picture of your current financial standing. You deserve a pat on the back. Only by knowing your real income, expenses, debt and savings can changes be made to better that bottom line (no matter what it looks like now). Don't get disappointed if your financial snap shot doesn't look very good on paper. It can't be improved without knowing what your starting point looks like. Every small or large step we make from here will be in the right direction. Just remember, every little bit helps. You will need to stay focused and motivated, without getting side tracked.

REDUCE REOCCURRING EXPENSES:

Next we will be analyzing the reoccurring expenses to eliminate waste. What can you cut and not miss at all? You will need to look at each of your monthly bills and see if you are paying for anything you are not using. At this phase we are tying to cut expenses without reducing any services. Below are some of the most common bills to look at, but you may have others also. Gather your statements and let's see what we can find. Companies frequently change the plans they offer and there may be something better for you now than when you first signed up, especially if you have had your account set up for some time.

BANK STATEMENTS - Is there a monthly fee? By calling your bank or checking their web site, you can see if they have a better option for you. If your bank doesn't fit your needs, you can easily change banks for benefits. Do you qualify for any credit unions? They often have better deals than most banks. Since $10 - $15 per month can really add up, this is something to look at closely.

HOME PHONE BILL - Are there any charges you don't expect to see? Does your phone company offer flat rates for long distance calls that will make this bill more palatable?

CELL PHONE BILL - Are there any charges on this bill for something that you don't currently use? Do you really use all the minutes you're paying for? Recently my husband and I eliminated a charge for texting from our cell phones. This saved us $10 per month for something we didn't use at all. It would be much cheaper for us to pay per text if we ever wanted to text someone.

CABLE BILL - Here you will need to think about what you really need and use from your cable company. Do you use all the channels you are paying for? Are you paying for cable boxes or remotes that you don't use? Is there a better bundled plan that will save you money? (Note: in our next reduction step, we will be cutting not just waste, but thinking of what we can do without. You may want to also think of your cable bill in that light at this point.)

BUNDLING SERVICES - Consider bundling cable, phone, and cell phone with the same provider. Depending on your current bills and where you live this could considerably help your budget.

Most people can find $10 - $100 per month they will be able to save by just reducing waste and monthly fees. Depending on your analysis from step one, you will be either using this amount to pay off debts or adding to your savings.

BALANCE HOUSEHOLD BUDGET:

We are now going to take another swipe at expenses to reduce the monthly costs even further. Our goal in this phase is to reduce expenses until you can balance your budget, and then you will be able to eliminate your debt and save even more. Look at each of your expenses in your worksheet. Is it something you can do without or even reduce? Take your time to really think about it. What can you do yourself to reduce or eliminate another monthly expense? Keep working line by line, reduce or eliminate the expenses that mean the least to you first, until the budget is balanced (at a minimum). Everyone has different priorities in their lives. One person will feel extremely deprived without all the cable channels, while for another it will be not big deal. My grandmother would never give up getting her hair fixed once a week, but would be willing to give up almost anything else to save a buck. Concentrate on your (and your families) priorities. This way to will be able to enjoy live as much as possible and still be able to make your financial situation look better. If you can further make reductions comfortably (even if only temporarily) you will be able to use that amount to reduce debt and increase savings. By no means should you leave this step without a balanced budget. Make sure your expenses are less than or equal to your income. Every little bit helps and no matter how small it makes a difference.

FURTHER REDUCE EXPENSES SO YOU CAN SAVE FOR THE FUTURE:

REDUCE DINING OUT - Reduce dinners out, pack lunches, when you do go out enjoy it fully. Depending on your current lunch routine, you can probably save at least $5 - $10 per day.

THINK TWICE BEFORE GOING OUT FOR THAT LATTE OR SPENDING THAT EXTRA $1 IN THE VENDING MACHINE - You can make your coffee at home, and pack those drinks and snacks to take with you. If you think and pack ahead, you can have more control of your diet and be able to have exactly what you want for those daily snacks.

CONSIDER CARPOOLING - With the price of gas these days, you can really make a dent in the rising gas bill.

CUT BACK ON THE NEW CLOTHES - We all need clothes, but consider cutting back if this is a large expense for you. Stop by a thrift shop and look around. You can find great bargains, but may need to look around a bit.

REDUCE CABLE CHANNELS - Consider reducing or eliminating your premium cable channels

REDUCE REOCCURRING SERVICE EXPENSES - For hair cuts, pedicures, manicures, lawn services, etc, add and extra week or two to your current frequency. For a service that is now done every month, think of trying to hold out for 5 or 6 weeks

DO SERVICE YOURSELF - Can you or a family member reduce or eliminate a service by doing something yourselves? Think about lawn care, home repairs, pool care, ironing instead of dry cleaning, etc.

REDUCE YOUR MAGAZINE SUBSCRIPTIONS - Subscriptions are only cheaper than buying the magazine at the stand when you are interested in every one. If it's a craft magazine for instance where you will only be interested in a few pattern per year, consider only picking up the ones you'll really enjoy.

NETFLIX INSTEAD OF THE VIDEO STORE OR THEATER - This is one subscription that I fully believe in. My family and I are able to enjoy many movies for a low monthly charge and no late fees. I have only had good experiences with this company. They quickly turn around the moves and strong customer service if you have any problems. When trying to reduce expenses this is an easy way to get a lot entertainment for a small cost.

FREE ENTERTAINMENT - Check your local paper or their web site for free activities, art shows, free concerts, etc that you'll enjoy.

REVISIT THE LIBRARY - If you read a lot this is a great option to buying all the books then having to get rid of them. Most libraries not only have books, magazines, and news papers; but also have audio books and DVDs.