Budgeting Tips to Stay in a Positive Direction

Spending Wisely Keep your home-life stable.

Make sure that you’re able to comfortably meet all of your monthly expenses. This is where it all starts. Your spending priorities begin with being able to pay your rent or mortgage on time; put food on the table; keep the utilities on; insurance premiums current; and not compromise on medicine. Next in line are any secured payments you may have, such as your vehicle payment or loans with significant collateral, followed by other debt obligations. Wondering how you’re going to meet your existing commitments puts stress on anyone and any relationship. Do what it takes to get these areas under control.

Prepare for an extended layoff.

No one, regardless of industry or pay grade, can guarantee that they won’t find a pink slip in the mailbox. Experts have long advised that having between three and six months income set aside is a must. Now that figure is creeping up, with some recommending a full year’s income saved. Finding a new job may take longer than ever, so you need to prepare for an extended time without income. Yes, you’re saving money you hope you’ll never need, but you’ll not regret having it to fall back on if you are laid-off.

Have a rainy day fund.

The economic weather forecast isn’t looking very good. In addition to the major savings suggested above, you also need money set aside for the everyday unexpected (and unbudgeted) things that happen in life. Without at least one month’s income in a separate, interest-bearing, liquid account, even the most minor emergency can catapult you over the edge and into financial distress. Remember, it’s not if the emergency is going to arise, but when. Be prepared by building your emergency fund.

Go to war with the enemy (aka your debt).

First step: stop charging. Second step: pay off what you’ve already charged. Third step: pat yourself on the back. It only makes sense to put extra money toward the area that is doing you the most harm financially, and that is credit card debt. Whether you devote extra money to the card with the highest interest rate or choose to knock off small debts first, construct your battle plan and declare a war in debt.

Prepare for retirement.

Time is money’s best friend. If you’re young and have a long time horizon before retirement, you’re in a wonderful place. It may not feel like it since you have other demands on your money, but with stock prices so depressed, you can land some real bargains. But, to do so you have to get in the game, and the best place to start is your retirement plan at work. Fully fund it if you can, but at least contribute the amount your employer matches or you’re giving up free money. Next, if you can also contribute to an IRA, either traditional or Roth, take advantage of that tax-saving vehicle, too.

Plan for known future expenses.

Many people are caught off guard with major expenditures such as a college education, a family vacation, or replacing a vehicle, even though such costs should come as no surprise. Without saving for these items, you end up borrowing and paying interest. Look into the future and see what expenses you’ll need to deal with and start planning for them today. You might even want to categorize your savings so that you can track your progress in each area, as that can serve as a motivation to keep going.

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