Most recent posting below. See other articles in the column to the right.
One of the most frequently asked questions about money management is how to develop a household budget that works. Far too often, people wait until they are in financial trouble before they start thinking about budgeting. Either they get laid off or they find themselves dealing with a large unplanned expense. Either way, a household budget could have helped.
Evaluating your cash inflows and outflows on a monthly basis seems to be the best and simplest way to get a handle on your finances.
Your first step is to figure out your monthly income after taxes. This is the "net" amount deposited into your bank account. If your income varies, calculate the average of your net income over the last 3 months. And don't forget to add savings account interest here too - every penny counts.
Then make a list of your fixed monthly expenses - meaning you pay the same amount towards them each month. That may include: housing (mortgage or rent), car payments, credit card and school loan payments, phone, cell phone, cable TV, satellite radio, child care - all of it. Don't forget to list the bills that come quarterly, annually, or semiannually.
Now you should have two columns: one for net income and one for fixed monthly expenses. But you're not ready to compare the two against each other just yet. There's still more calculating to do.
For now it's time to account for all the variable expenses you have each month: dry cleaning, personal care, groceries, medical costs, pet care, entertainment, gifts, and anything else you spend money on. This is where budgeting starts getting a bit more creative.
Estimate other weekly and monthly expenses. The more precise you can be, and the more of your variable expenses that you can think to include, the more accurate and effective your budget will be. For example, when you calculate food costs, that might include groceries, work and school lunches, and occasional dining out. Specifics matter, even when you're making estimates.
Before considering this step completed, and just for good measure, review your checkbook ledger and credit card statements for the last few months to see if there's anything you left out.
Add all these variable expenses to the column containing your fixed expenses and add the two together. You now have an idea of your total monthly expenses. Subtract this sum from your total net income.
And now the moment of truth has arrived! If the remainder is positive (greater than 0), then congratulations! You've done well. You already live within your means and can start kicking your savings plan into high gear, whether you're saving for retirement, for charity, for your children's college education, for a new home, or for a vacation.
If, however, the number is negative, fear not. It's that way for most of us. At least now you know where all that money has been going. All you do now to bring that remainder back into positive territory is adjust the numbers on your variable expenses. Hopefully that will do it. Then you just have to stick to those newly realized budgetary constraints (or make adequate adjustments to compensate).
If that doesn't do it, you may have to take a more drastic look at either your lifestyle or your income sources or both.
But before you hang your head and resort to taking on that second (or third) job, bring your family into the conversation. Discuss how you all can better prioritize your expenses. Choose certain categories with tallies you'd like to bring down and set targets monthly to try and reduce those costs. Play around with the numbers until something works.
Other options include comparison-shopping for cheaper prices and lower rates on certain expenses. Trim non-essential allowances, for example: go to the salon every three weeks instead of every two. Or trade in that gas-guzzler for a more fuel-efficient vehicle.
If at all possible, it's also highly advisable (to say the least) to take 10% of your income off the top and "pay yourself" - start building up a savings.
Creating and sticking to a budget then maintaining its relevance and effectiveness by adjusting it regularly is essential in successfully managing your finances. Now you can start to make decisions based on facts and not guesswork. You're better able to plan for so-called "unexpected" future expenses and, even better, the things you want.
And for an even easier and more effective way to create and manage your household budget, use a simple budgeting software like Budget Forecaster from Strativia Software. It'll set you on the path to financial security. Checking and Savings Accounts
Checking Accounts are operated mainly for making purchases and for paying bills. Savings accounts on the other hand, help you save money for your future. Though many banks lure you with attractive offers and freebies, you have to be careful not to choose the account merely on the basis of the benefits offered on the joining of the account.
There are different types of checking accounts. Basic, Free, Express, Lifeline, Interest-bearing, etc., are some of them. Different accounts offer different services. Therefore it is essential that you first understand the service you require through your checking account and then opt for the right one.
For example, a Basic checking account does not offer any interest for your deposit. In other words, by choosing this account, you will avail only the services such as the payment of the bills and some debit card transactions. You may issue a certain number of checks and if you cross the limit, you will be charged an extra fee per check. Also some banks insist that you keep a minimum balance in order to supplant the monthly maintenance charges.
A Free checking account offers the service almost free of cost. There are no criteria such as the minimum balance or the restricted issues of checks. There are no service charges regardless of the number and nature of your transactions. However, you will be charged a reasonable penalty if your check gets bounced.
Interest-bearing accounts offer a very low interest, which is paid monthly. Mostly the banks require a minimum balance to operate the account; the failure of it will result in $10 service fee per month.
Express check accounts are for those who wish to avoid stepping into the banks. The service includes ATM, telephone, PC banking facilities, and unlimited check facilities. Though there is no monthly fee, the customer may often end up paying a huge service charge owing to the extra transactions made through these facilities.
Lifeline account is an economy account offered to low-income groups. The facilities include a certain number of transactions with a monthly fee ranging from zero to $6. The fees, minimum amount, and other terms of this account are normally set by the law, not by the individual banks.
Saving accounts are known for their interest rates, offered in various forms. Saving account is a 'risk-free' investment option for those who do not want to get into the adventurous game of mutual funds or shares.
There are different saving options- short term and long term. Certificate of Deposit will be a good option for those who intend for long-term deposits. They offer higher interest rates, but charge penalties for early withdrawals. Compound-interest saving accounts offer more advantages than simple-interest savings accounts. In compound interest savings, the interest accrued in each financial term is added to the previous principal, and the sum of the two will be counted as the principal for the next year. So every year, the amount will accrue exponentially.
Whatever the type of the account is, it is essential that you understand the basics of the services. While choosing a checking account, you may focus on the services that you require whereas for opening a savings account, you may think of the benefits, especially the interest.
Add a Comment