HOW TO: Plan An Effective Budget

If you're currently spending more than you earn, it's crucial to find a way to balance your budget. Those who don’t address the situation could find themselves in a downward financial spiral that’s difficult to escape.

Here are tips to help you balance your earnings and outgoings.  

1.   Boost your budget by saving on essentials

If your budget doesn’t balance or you’re looking to free up some extra cash, the first thing you should do is try to cut the cost of essential household goods and services. The changes you make aren’t likely to make you feel deprived – but they will help to keep more cash in your pocket.

2.   Cut the cost of your debts

If you have existing debts – particularly on credit cards – these are likely to be an expensive drain on your budget. However, taking out a new or a Life of balance transfer card could cut your interest costs dramatically, allowing you to pay off your debt more quickly. In turn, this will speed up the process of balancing your budget.

If you’re thinking of applying for a loan to consolidate existing debts, you should ensure you have a plan to pay off what you owe. Sometimes people who try to bring all their borrowing together in one place continue using their credit cards, ending up in a far worse situation than before.

3.   Assess the 'extra spending' in your budget

If your budget still doesn’t balance, it’s time to cut back on non-essential spending. This means prioritising the activities you get most enjoyment out of, and spending less on those that aren’t offering you good value for money. Spending less on going out and buying new things isn’t easy – but not cutting back now might mean you’re in an even more difficult position later. Remember, if your budget is out of balance in the long-term you’ll end up with debts that could be expensive and may take a long time to clear.

4.   Generate extra cash where you can

Alternatively – or to complement cut-backs in your spending – you could consider new ways to increase your income. First and foremost, if you have savings and investments that you’re relying upon to generate part of your income, make sure they are performing as well as possible.

In addition, consider freelance work if your employment contract allows it. Are there ways you could use your skills to generate a little extra income by working in your spare time? You could also sell unwanted items via eBay, could consider renting out your spare room or could even sign up to rent out your car when it isn’t in use.

5.   Get debt help if your budget won't add up

If you’re still struggling to balance your budget after cutting back on spending and are concerned about the amount of money you owe, it’s important to seek help as soon as possible. Spending more than you earn each month isn’t sustainable in the long-term, and will push you further and further into debt.

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Keys For A Happy Financial New Year

For many people, the New Year signifies a fresh start. The mental and spiritual batteries are recharged after the drain of the hectic holidays. We’re more optimistic. We’re open to new possibilities, new strategies, and new aspirations. New Year can be a time to think about personal and financial goals and the “new” commitments you plan to make. Yet, for all the initial enthusiasm, keeping yourself motivated, committed and moving toward the accomplishment of those goals is often tough. Here are personal finance tips that can help you toward a happier new year.

1.   Set clear goals. 

We’re talking any goal you’d like to work toward or achieve in the New Year that has financial consequences. For example, perhaps you want to work less so you can spend more time with your family, or you want to change to a career that excites you more but that pays less.

Setting specific, realistic goals—and writing them down—is such a powerful financial tool for realizing them. It not only clarifies what you have to do financially to achieve the goals, it motivates you to achieve them within a specific timeline. Saving for something provides much more financial incentive than merely following the standard advice to save 10 or 15 percent of your monthly pay.

2.   Discuss the goals with your family. 

They can help you clarify the goals, motivate you to make changes, and aid in their achievement.

3.   Create a financial plan. 

All financial actions (or inactions) affect other financial actions. If your financial left hand doesn’t know what your financial right hand is doing, one may undermine the other. For example, lack of adequate insurance for home, health, and other aspects of your life could decimate your retirement savings and investments if something goes wrong.

You may need professional advice at this stage, or you may feel you can do it yourself. Regardless, the key is creating and following through with the plan.

4.   Review the last year. 

Life is continually in flux and change can have a profound impact on your financial plans. For example, during the past year did you get married or divorced, have a child, change jobs, or change short-term or long-term goals?

5.   Establish a spending plan. 

Achieving financial goals is built on a single principle: spend less money than you earn. First, list your regular, dependable sources of income. Then track how much and where you spend money every month (including cash). Average out on a monthly basis periodic expenses such as car insurance or property taxes.

Subtract monthly expenses from monthly income and…do you have a surplus, are you in balance, or are you spending more than you’re taking in? Are you skimming 5 or 10 percent right off the top of your income for savings and investing? If not, what expenses can you reduce or income increase in order to save toward goals? Automate savings to make it less painful.

6.   Reduce debt. 

Resolve to lower debt this year. As interest rates rise, every dollar of accumulated debt becomes a heavier and heavier drag on your entire financial life.

7.   Diversify your household assets. 

You know not to put all of your investment eggs in one basket (such as high-tech stocks). Apply this advice to your overall financial household. If possible, working spouses should be employed in separate companies in separate industries in order to reduce the possibility of both of you losing jobs at the same time. Go easy on company stock and industry stock where you work. If your employer or the industry suffers hard times, you might lose not only your job but also much of the value of your investments. Avoid investing in a single business or industry that dominates the economy where you live. If the company or industry suffers, so might your home values along with your investments.

8.   Educate yourself financially. 

The more you understand about finances—from budgeting to investments to insurance—the more confident and motivated you’ll be to take the right financial steps this year.

With 2014 behind us, don’t feel pressured to make resolutions because you feel you should. Instead, open yourself to the possibility that setting concrete financial goals can be the start of some truly positive changes in your life. Remember, the clearer your goals are, the more confident and motivated you’ll be to take the right financial steps in 2015 and beyond. Best to you in the New Year, and happy goal setting!

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Get Your Financial Health for 2015

Money worries? You're not alone. Financial stress — from job loss, credit card debt and retirement — is the second leading cause of stress in America. Beside that, a large spending on certain celebrations or holidays can also be a cause of money worries. The end of the year can be hectic. Between juggling parties, last-minute holiday shopping, travel and spending time with family and friends, the last thing we want to do is think about our financial health. While it’s tempting to put off reviewing your finances until the New Year, you might lose the opportunity to make some critical financial changes and save some serious dough before the clock strikes midnight on Dec. 31.

Stop worrying about your finances! Here are six easy ways to get your financial health in order for 2015:

1.   Review your spending. Analyze your spending patterns over the last few months. If you’ve gone a little overboard on holiday gifts or dining out, it might be time to revisit your budget. Review your financial goals from last year, and assess if you were successful in meeting those goals. You might also consider whether they will work for you in the coming year or if it is necessary to make adjustments. If you have yet to establish a budget, there is no better time than now to get started.

2.  Get a free credit report. Get your annual free credit report now so you know where you stand before heading into the New Year. Look over your report, and check for errors or negative information. If your credit history could use some improvement, make 2015 the year you get back on track.

3.    Develop a debt payoff strategy. Before heading into 2015, take the time to review your balances. If you have extra cash in the bank, it’s worth making a large payment toward cutting down your debt. If you can’t pay down a debt you accumulated this year, create a debt payoff plan that will get it down next year.

4.   Automate everything. If you haven’t already, now is the time to finally automate your bills and savings. The more you can automate, the easier your finances will be in 2015. Download a free bill payment app that will help you pay your bills on time and maintain a regular savings plan. This is also a good time to review and cancel any automatic subscriptions you aren’t using such as music streaming services, magazines, newspapers or premium subscriptions.

5.   Spend your FSA. Flexible spending accounts allow employees to set aside a portion of earnings tax-free to pay for qualified expenses, most commonly medical expenses and child care. So if you have an FSA for qualifying expenses, now is the time to submit any outstanding claims.

6.   Review your insurance plans and rates. Look over your health, life, homeowners, renters and car insurance plans. It’s easy to “set it and forget it” – and then end up with the same insurance carrier for years. If you have any changes coming in 2015 that you need to plan for, now is the time to shop around for new insurance plans and rates. 

With only a few days remaining in 2014, there’s no better time to give yourself a full financial review and make sure you’re doing all you can to set yourself up for success in 2015.

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