Recession over, what now?
People are starting to say that the recession is over, or finishing up. So if it really is over, what should we do with our finances? Even though consumers are starting to spend some money and again feel comfortable with their money, there is still a long way to go before we are at the employment rates we had before this mess started. So how can we keep something like this from happening again?
The first thing that people need to remember and continue working on is maintaining a small savings. Traditionally Americans have not been savers, however, if we had more savings prior to the economic meltdown, the unemployment troubles and foreclosures would not be as bad.
The second thing to consider is divesting their portfolios. Social security isn’t enough for people to retire on, they need money of their own if they are going to live comfortably during retirement unless they plan on working at least part time for their entire life. Thus, the earlier you start saving for retirement the better. IRAs and 401ks are great ways to start saving towards retirement. However, as we have learned from the financial situation these past few years, nothing is sure. Stocks may go up but they may also go down. Thus, you need to put your money not just in stocks, but also have some in bonds, mutual funds, and other investments such as a family home.
Finances and Family
I was listening to the radio last night while driving back home and realized that there were a lot more calls about split couples who still loved each other but were having issues. Times of financial difficulty put extra strain on marriages and relationships. Everyone knows that money problems is one of the top reasons that couples separate or get divorced. Don’t let yourself get caught in that trap.
The best way to avoid, or at the very least minimize, financial stress on your relationship, you need to realistically assess your financial situation, make goals, prioritize your interests, and then plan a budget based on what you discovered. Talking things out and planning for difficult times before a spouse gets laid off or you find out that there is another baby on the way helps to make sure that when these surprises come along you have a plan in place that can be adjusted to take into account these changes.
The key to a budget is flexibility. There will be surprises, things don’t go according to plans. However, flexibility doesn’t mean that you totally scrap the budget when you get a surprise. For example, if you find out that there is a baby on the way, that doesn’t mean you scrap the budget, instead, you need to reduce things in areas of the budget, say instead of going to the movies you rent a movie. When one part of the budget changes you need to have the flexibility to reduce your budget in other areas to cover for that added expense.
Budgeting to Survive
How much do you spend each week on eating out? How much on gas? Groceries? Impulse purchases? Until you know where your money is going you won’t know how much money you really have to spend and how much you could be saving.
To survive this economy you need to start running your household like a small business. Small businesses have limited resources so when they make a purchase they first do their research to make sure they get the best purchase for their needs and budget. What are your needs? Do you really need dessert with your lunch? What about the HBO movie package you pay extra for each month with your cable? A small business isn’t likely to purchase a soda machine just because one of its employees requested it. Similarly, you shouldn’t go to the movies once a week just because your kid wants to see the latest movie.
This is a time to prioritize and make those tough decisions. While you should not completely cut out spending you need to determine what spending is profiting you and what spending is just a waste of money. To some people getting a cup of coffee at Starbucks a couple of times a week is the only way they can relax for a few minutes and just enjoy life. If that is you then you shouldn’t cut out the Starbucks because without your relaxing me time you might not be able to function as well as you would with that me time. To you that is important so you can make it a priority and cut out something that isn’t as important to ensure that you have the money to keep that up.
While life isn’t great right now we need to remember that this doesn’t mean that we bury our heads in the sand and pretend that everything is normal and spend the same way we did a couple of years ago, but neither can we totally close our purse strings and save every dime we get. There has to be a happy medium where we make allowances for what is important and save for the future by cutting those things that aren’t as important.
Eat More Pay Less
Have you ever stopped to think about how much food the average American has in his house without even realizing it. Yes, we all head to the fridge, hand our heads, and moan that there isn’t anything to eat, but what we mean is the fridge doesn’t have what I want to eat right now.
I challenge you to start making a list of what you actually do have in your house to eat though. Believe me, you will be surprised. Most of us have at least 2-3 boxes of pasta in a drawer or pantry, a couple of pieces of meat, some cans of soup, vegetables, beans, maybe a can or two of tuna fish. When you sit down and think about it, there is enough food in the house already to feed your house for probably a month, the key is to use it.
Instead of going grocery shopping when you are hungry or in a hurry and you just throw everything that sounds good or is a quick meal into your cart, take a moment to sit down, write out what you already have in your house, and come up with a meal plan that will use up some of those things that are just sitting around. Not only will this save you money on your grocery bill, these meals will likely be healthier because you are taking the time to plan them out and thus can ensure that you get so many vegetables and fruits per day other than french fries and cinnamon apples.
When you do go to the store, take your list along and only get what you need. Grazing just adds extra expense and calories to your day. You don’t really need that box of popsicles or that bag or cookies. If you want something sweet, get the ingredients and make it yourself or with your kids. This can be a great bonding time and then you also know what your kids are actually eating rather than all those unpronouncable chemicals listed on the back of boxes these days. People don’t have as much money now, but because many are working less, they do have the extra time to spend with their kids cooking and creating shopping lists that ensure they stick to their budget.
What if I get laid off?
Christmas is literally just around the corner and the market delivered more bad news today. In November a record 533,000 people lost their jobs and 1 in 10 families is behind on their mortgage. That doesn’t paint a very pretty picture of the economy or encourage must optimism in market forces. Instead, many people are wondering if they could be next. The best way to survive this economic crisis is to make a plan.
In several of the previous columns I mentioned the importance of budgeting, whether you are budgeting to ensure you have enough money to pay the bills, shop for Christmas, or save for retirement, budgeting is key. In this market, you also need to be budgeting for the rainy day possibility that you may become one of the thousands losing their jobs.
In the past when times got tough, Americans got plastic. Now, however, credit cards are increasing their fees and interest rates and reducing their credit limits because they are afraid of not being able to last this crisis either. Like it or not, Americans now need to prioritize their needs, learn how to budget, and start saving, which means eliminating the plastic unless you can afford to pay the entire bill when it comes due.
By prioritizing what you need from what you want, you may find that you can live without a few little comforts and use the money you would have spent on that to pay down your credit cards or save just in case the unthinkable happens and you do get laid off. The government can’t save everyone.
Making a Budget Stick
Budgeting is like dieting, people always start out with good intentions but often fail to see it through. One reason for this is unrealistic expectations. The best way to budget is to make it a life change by doing a lot of little things to save money and live within or under your means.
One problem I have noticed is debit cards. Yes, they make life easier, but people no longer keep track of everything in the bank account. With checks you saw the money coming out of your account with each purchase, at least if you kept a running balance in your checkbook. If you aren’t keeping track of what you make and what you spend, you will be more likely to run up excessive fees for overdraft or other bank goodies. One way to avoid this is to create envelopes.
Envelopes? Yes, when you deposit your check, take out your money budgeted for food, groceries, and other items you usually purchase with your debit card. Put the amount for each category into an envelope and when you go to the store, don’t take your debit card. Instead, take only your envelope so that you can’t spend more than budgeted. This way, when you are tempted to purchase those chocolate chip cookies and the roasted chicken, you will have to decide what you can really afford and which item you can live without.
As an added bonus, put all the money left in the envelopes at the end of a month in a special savings account to save for a rainy day and watch the funds grow.
Budgeting helps
Ever since I got married almost two years ago, I have been handling our finances and doing the budgeting. At first, it was more of a trial and error as there have been times when I went over-budget and then I have to take note of it to make sure that I don’t commit the same mistake in the future.
It is a challenge to make ends meet especially these days where the prices of general commodities continue to soar. When I budget out finances, I make sure to cover the essentials like house rent, bills, food, etc. It is a good thing that my husband supports me because he understands our situation. When we have extra money, we also know how to have a good time. Usually, we just eat out together with our son. If we would like to go out of town, we save up for it monthly so that we have enough time to raise funds.
Nowadays, I notice that even if we earn a little more than before, our expenses catch up in no time. We even can’t travel in our car often because the gasoline prices go up every week and it’s just too much for us. It’s a good thing we have our good old motorcycle to rely on for short trips around the town.
Finding Ways to Earn Money
Today I am cleaning out my closet to see which clothes still fit and which don’t. Some of the still good items I am thinking of selling in eBay and the others maybe I could give to my younger cousins. I have applied to my previous company and when I get accepted, I would have to wear office clothes again. By selling some of my stuff online, I could raise money to buy new clothes.
As we are paying off our credit cards, we are strictly on a budget. That being the case, I have to find ways on how to have funds to buy new items. It’s not really a necessity for me so I did not include it in the budget. I have to find the money to accommodate the expenses.
The idea clicked to me when I was rummaging through my clothes and found that there a lot of pieces that do not fit me anymore as I gained weight when I got pregnant and up to now I still haven’t lost the extra pounds. I did not want to force myself into wearing ill-fitting clothes so it is best if I dispose off them and earn money at the same time.
As for those that will not get sold, I can give them to my cousins especially since my clothes are gently used and some I only got to use just once or twice. I’m sure they can still use it.
I hope my items will sell so that I can raise funds to purchase new clothes. In that way, no need to alter the budget just so I can buy new ones.
To Buy List
When we do our grocery, it is important to bring a To Buy list of all the things that we need. This will greatly help to be within the budget and also to shorten time spent on the grocery. How many times have you wandered aimlessly in the supermarket just because you don’t have a clear picture of the things you need. I can relate for this has happened to me a number of times.
Before heading to the supermarket, check your food supplies to see which things you need to replenish. If you can create a menu plan for the week, that’s even better so that you can at least buy the ingredients ahead of time for some of the meals. This is also a perfect opportunity to make an inventory the food you have left so that you can check which foods need to be consumed before its expiry date. If you don’t need to buy in wholesale or bulk, you can note it too. Some food may spoil easily or the veggies may wilt when not consumed immediately. We can save money by doing this because we only buy the things we need.
It also saves money if some of the supplies can be bought in the market where it is cheaper and you can haggle for the price. It maybe just a few centavos but it also helps to have loose change.
These are just some tips to stay on the budget. Sometimes it happens that unexpected expenses come up while shopping but when you have a clear view of the necessities, it’s easier to make a judgment if something is worth buying.
Using A Budget to Fix Finances
Setting a budget for your family is a strategy to fix your finances. I know we all grumble about how there is not enough money coming in to actually budget, especially if you are on a fixed income. I have definitely been there. It is hard when you are living from paycheck to paycheck and then there is the rent/mortgage, utilities, gas, and other household expenses. So I try to list some tips here and hope that this can help you.
The first thing is to get a reality check on where your money is going. We miss so many of the small things such as cigarettes, candy bars, and other small items. However, you should spend a moment to write down all of your expenses you have coming in and what you think you spend out. Of course list the major items first such as your rent, utilities, car payments, etc. If you cannot do this at this time, then I suggest start a spreadsheet or use your checkbook register to track everything that you spend your money on. You can also do this on a plain piece of paper. The key is to just do it.
Once you have a list of all your income coming in and a list of everything you spend your money on (expenses) then you should be able to devise your budget. Elements of a budget should list things such as your rent/mortgage, car payments, medical insurance, car insurance, food, and recreation expenses. Start with your income and then start subtracting your expenses, this will allow you to access rather or not you have disposable income or not. Disposable income is income that is left over after all your expenses have been paid. If you are really optimistic, you can devise a yearly budget instead of a monthly budget by multiplying your amounts x 12.
Now since you know where your money is going you can begin to see those areas in which you need to cutback on your spending on. Perhaps if you are like most people who struggle day to day, then you will probably have to find a part time job or start a small business that does not have huge upfront costs to support your family.