Home Budget – How to Live Within Your Means

Spending a little time creating a home budget will help you live within your means and live a better life. Unfortunately few families view this as an important part of their lives – those same families are finding it more and more difficult to make ends meet.

I read lots of experts that recommend that you track every penny that you spend, that you develop a budget that has 50, or 60, or more categories for everything from postage to pasta, from envelopes to electricity.

I don’t know about you but that seems like an awful lot of work to me! I tried this method back in my 20’s but could never stick to it, I found it wasn’t any fun and was overkill.

A am a big believer in home budgeting, you can’t improve what you can’t measure is a business axiom that I think fits when it comes to using a budget to improve your personal finances.

Here are some tips to help you with your budgeting:

Keep it simple: Start out by creating a budget uses a dozen or so main categories that fit your lifestyle and that you want to understand where your money is going. By starting simple you can build the habits you need to succeed, and begin the process of learning.

Make it fun: Let’s be real…for most of us tracking where our money goes is not very exciting. I found that finding ways to make the process fun helps me stay on track, and provides incentive to continue. Try rewarding yourself for accomplishing a certain goal, or look for creative ways to reduce your spending.

Make it meaningful. This is your money we are talking about, your life. Simply because someone recommends you budget for electricity does not mean you have to or should. Electricity might be a very small portion of your monthly expenses because of the part of the country you live in or your lifestyle. Why spend the time and energy tracking a small item when you are spending $300.00 a month on a coffee habit.

Make change. A budget is a plan. It is a road map for getting from where you are to where you want to go. It is meant to change, and you need to accept this fact. If something is not working, or you need to create more detail…then do it. Develop a process and routine that works for you, and then continue to review what is working for you and what isn’t…then make the necessary adjustments.

Budgeting requires that you take personal responsibility for your finances and that you are disciplined. Like anything that is new, it takes time to learn. If this is your first budget it will probably be a mess, that is ok…it is supposed to be. Allow yourself to make mistakes, make changes from what your learn and get a little better the next time. With home budgeting, in a years time you will not only have more knowledge about the process of budgeting but you will also have more money in the bank as a result of living within your means.

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Five Ways to Stop Creating Debt

Most of us have been there – incurring credit card debt and seeking ways to consolidate the debt by utilizing another credit card. The “borrowing from Peter to pay Paul” syndrome is alive and well and as a result consumer debt is higher than it has ever been.

The current economic crisis has produced a credit crunch that is wreaking havoc on credit card interest rates. Even though the Federal Reserve has lowered interest rates dramatically, it has not decreased the interest rates on credit cards. To the contrary; because of the increased burden on consumers, many individuals are either going into default or declaring bankruptcy. Moreover, the banks are raising interest rates for those who have been making late payments and/or skipping monthly payments. People are scrambling to consolidate student loans debt

If you are concerned about your current debt, here are five ways to help you deal with the situation:

1. Debt Consolidation. When you receive a credit card offer in the mail stating that you can pay off other credit cards by applying for the card with a 0% APR – read the fine print. The 0% APR is applicable for a short time only. Unless you can pay off the new card within the time frame given, you are just creating additional debt.

2. One Card Only. If you have more than one credit card, save one for emergencies only and cut up the rest. If you cannot afford to buy an item with cash, don’t buy it at all.

3. Pay Down Debt. The next few years are going to be difficult during this recession. Start paying off credit cards using the Snowball Method. Make a list of the credit cards, with the highest interest rate card at the top of the list. Instead of paying the minimum for the card on top of the list, add additional money to the payment. Once the first card is paid off, use this same method with the second, and so on.

4. Credit Card Checks. Every month you may receive credit card checks, one of which is probably made out to you for the amount of $1000 or more. The rest of the checks can be used for purchases or transfers. Rip them up! It is very tempting to deposit the check and use the rest to make purchases.

5. Department Store Credit Cards. No doubt you have been asked by the cashier at a department store if you wish to apply for instant credit in order to obtain a discount on your purchases. Do not apply. Department store credit cards have the highest interest rate among all credit cards.

We are a nation in debt - over a trillion dollars’ worth. Since we do not know how long this recession will last nor how it will affect our income and retirement savings, it would be prudent to resist any temptations that may come your way inviting you to spend more than you can afford.

Join others taking control of their financial lives at http://www.my-small-life.com and sign up to receive our FREE report Wealth Crushers.

What Everyone Should Know About Achieving Financial Freedom

I believe that achieving financial freedom is possible for everyone! And in many cases I believe that many of us could find financial freedom tomorrow!

Do you believe me?

Why or why not?

It did not say that you could be “rich” by tomorrow, or that you could retire tomorrow, or that you would be making millions of dollars a year, or that your net worth would mysteriously shoot to stratospheric levels.

No, what I said was I believe that many of us could find financial freedom tomorrow!

The first place to start is to determine what financial freedom means to you.  This seems like a logical place to begin, actually defining what the term means.  With this definition we can then compare our circumstance to see if we have achieved financial freedom yet, and/or figure out what steps we need to take to achieve it.

I don’t think many of us spend the time to actually think about what financial freedom means to us…let alone develop our personal definition.  I know I didn’t for many, many years.  I only had a vague idea of what I was after.  In my case the vague idea was a specific dollar amount based upon the financial spreadsheets and personal finance budgets I maintained for my family.

However, while I had a specific dollar figure…that kept changing based upon my increased success by the way, I had not considered most of the other aspects of my life.

For example, if I wanted $1,000,000.00 in the bank…if this was what I needed for financial freedom this was only true for a limited set of assumptions.  What if I wanted to live in a “Mansion”, with a butler, and maids, and a chef…and throw in a driver while we are at it, well I probably would need much more than a million bucks for this lifestyle.

In contrast, what if I wanted to live in small town USA somewhere in the middle of the country, would I still need $1 million?  For this example lets assume the answer is NO.  So I could actually achieve “financial freedom” a lot sooner than I anticipated and would need less than a cool million.

Let’s try this example…the majority of financial “experts” and personal finance models say that you need 80% of your current income when you retire.

Says who !!

If we take these messages as facts it will have a profound impact on when we retire and when we achieve “financial freedom”.  It took me many years to see the mistake I was making by using the financial models without question.  Each time I received a promotion and made more money, the amount of income I needed in retirement increased as well.

It went from 80% of $1,000 or $800, to 80% of $2,000 or $1,600.  Every time I became “more successful” financial freedom became more elusive.

Finally I began spending some time thinking about what the “financial experts” were saying, and what financial freedom meant to me.  I knew the amount of money I was putting out to maintain our home, there was a cost to our beautiful 3,500 sq. foot home that I knew first hand because of the home budget we maintained.  I also knew that there was NO WAY I needed this size house after the kids were gone (could easily be argued that I did not need it now), and that moving to a smaller home would significantly reduce our expenses.  I would now need less money to achieve financial freedom!

Hopefully, you get my point.  Financial freedom is a personal choice and there is not a one size fits all formula or advice that will work.

Our current lifestyle involves a lot of travel.  Over the past year I have researched and read about a lot of people that spend most of their year traveling.  Many of these couples and families spend less than $25,000 a year to maintain their lifestyle.  My guess is that if you ask these folks whether they have achieved financial freedom the answer would be yes.

They don’t need all of the possessions, all of the consumer goods, and all of the “normal” trappings of western society to make their lives whole.  They live exciting, adventurous, fun, and balanced lives, but choose to spend their time, energy, and money in other areas.

I do not assume to think that this lifestyle is for everyone, my point is that you need to spend the time thinking about it and developing your own personal definition of financial freedom.  You may come to realize that with only a few small changes, or in our case one large change, you can achieve financial freedom.