3 Reasons Your Budget Isn’t Working

How you manage your money plays an integral part in your overall financial health. This is true whether you are rich or poor. Obviously if you have less money to work with, budgeting can be a challenge, however even those who have more money to work with can make mistakes managing their cash. The key to keeping your finances on the right track is creating and sticking to a budget that works. It is not enough to simply have a budget but rather one that reflects your current financial situation. Otherwise, you will likely find yourself frustrated when the numbers don’t match up each month. Here we look at three reasons many budgets don’t work and how you can avoid making common budget blunders.

• Budgets based on wishful thinking- If you create a budget based on how you hope to spend your money, you are doomed to be off the mark each month. The point of a budget is not to deprive yourself of all things that bring you pleasure but rather to organize your finances in a way that a specific amount of money is allocated toward specific categories each month. In order to get your budget on track or at least heading in the right direction you must be realistic in the amount of money available to pay bills and how much you need for living expenses. By convincing yourself you can live on $30 per week while allocating the rest of your income toward bills, expenses and savings you will likely find come up short. Avoid making an unrealistic budget or you will find yourself getting frustrated and giving up on the process all together.

• Budgets set in stone- A budget is not something you can “set and forget”. For most of us there are reoccurring bills that are the same or close to the same amount each month. This helps in creating a realistic budget but only if we allow room for changes. There are unexpected expenses that pop up and bills that are paid quarterly or semi-annually. Your income and expenses vary each month, therefore your budget must be tweaked or adjusted to accommodate these changes. You should also review your budget from the prior month to see how close you came to hitting the mark and what changes can be made to get closer to your desired numbers.

• Budgets that allow leftover money- It is not uncommon for people to create a budget to cover all bills and living expenses without allocating a place for “leftover” money. If you don’t have a plan for whatever cash is leftover after taking care of your responsibilities you are guaranteed to spend that money somewhere, often in places that are wasteful. Create a section of your budget to cover cash expenses for the week and then create a category for savings or investment contributions. By doing this you are less likely to simply spend leftover cash that could be of better use elsewhere in your budget.

By creating and sticking to a budget that has been designed to reflect your financial situation you are more likely to reach your financial goals. Without a working budget you take the chance of making mistakes that could end up costing you in the long run.

Tracking Your Personal Finances with the Envelope-Cash Method

Monitoring spending habits by using the envelope-cash method is a smart and easy way to manage your personal finances.  According to a survey conducted by the National Retail Federation, one fourth of US shoppers reported they would use cash this November and December.  That is a 9% increase from the same time one year ago.  Using the envelope cash method helps consumers track their spending, make sometimes difficult spending choices, avoid credit card debt, and live within or below their means.

How Much Are You Really Spending?
The envelope-cash method requires you to get a realistic picture of your personal finance situation. This method works best for day to day spending such as food, gas, and clothing.  Start by determining how much money you spend each month.  Take an estimate of how much you spend on groceries, entertainment, household supplies (toilet paper, batteries ECT…), pet food, work or school expenses such as dry cleaning or school field trips.  You might want to have a miscellaneous category in case something totally unexpected comes up.  If you want to know the exact amount, take a month to write everything down that you spend. You may need to look ahead to estimate upcoming events.  Figure out what works best for your personal finance situation.

Divvy Up the Cash
Once you have figured out how much a typical month costs including the unknowable and unexpected, purchase some paper envelopes and a plastic envelope holder.  These are easily found at a discount or office supply store.  Date and label the envelopes by week and category. Put the appropriate amount of cash inside each envelope.  Put each envelope in the plastic envelope holder and don’t touch it until you need it for a particular purchase.  When it is time to use the money for a purchase, take it out and spend it…wisely.  When it’s gone, it’s gone.  This helps get a sober view of where the money is going, how fast it’s leaving, and what you can do without.

Spend Less with Cash Only
There are several benefits to using the cash-envelope method for personal finances. Many consumers who use credit cards end up spending more than they would have if they had used cash.  A study of consumers using credit cards at McDonalds’ fast food restaurants found people spent 47% more when using their credit cards.  The danger of using this cash only method is that if you lose your money or it is stolen, it cannot be replaced.   So when working on your personal finances, try the envelope cash method, but keep an eye on the dollars so you don’t lose everything you have gained.       

Romancing on the Cheap: How to Keep the Love without Busting the Budget

Staying on a budget, monitoring your spending habits, and controlling impulse buying might not sound like the makings of a beautiful love story, especially to a spontaneous and hopeless romantic.  Keeping romance alive, whether married or single, can take the heart right out of your personal finances if you regularly go on expensive excursions.   With some careful planning and creativity, romantic dates can be exciting and economical.

Stay Home, Save Money
You don’t have to go out to have a romantic evening.  Hone your cooking skills and make a special dinner for your sweetheart.  It will cost far less than a fancy restaurant and the effort made will really impress.  Check out www.romancestruck.com for easy, budget and gender friendly menus for two.

Festivals, Fairs, and Festivities
There is a festival, fair, or festivity for any interest you and your date may have.  These events are inexpensive and give you a chance to walk around together, sample local fare, and enjoy the sights and sounds.  Search www.festivals.com for latest happenings in your area.

Get Outside and Play
If you two are the outdoorsy type, investigate local hiking and biking trails.  It’s a great cheap way to spend time together and get some fresh air and exercise.  The site www.trails.com has a full list of trails for just about every region in the country.   It will be good for your heart in more ways than one.

Pack a Picnic Lunch
Gather your checkered table cloth, napkins, and a basket and head out to a park for a romantic picnic for two.  Bring food that is easy and keeps well.  Explore the site www.the-picnic-site.com.  It has loads of ideas on how to plan the perfect picnic that will keep the beef in your budget.

High School Events
If you live near a high school, there is no limit to the amount of low cost/high quality entertainment it offers. Most schools have a drama and music department that performs plays, and concerts throughout the year. High school sporting events are an inexpensive way to check out local talent.  You never know, you might spot the next Tom Brady or Derek Jeter.  Check the school web site for event information. 

Desert Night
Instead of splurging on an expensive restaurant, spend less than half of that on a nice desert at the local ice cream parlor or pie shop.  Not only is this easy on your wallet, but it can help you get to know local small business owners who are more apt to cut a deal for regular customers. 

Keep the Romance, Lose the Debt
There are simple ways to stay on budget and mange your personal finances while still having a vibrant dating and marriage life.  Look for ways to have fun, but mange the budget and your love story will always have a happy ending. 

New Year New Budget

Budgeting is not a once-and-done duty. In order for a budget to be successful, it needs to remain ever-revolving. As December quickly heads into a new year, it is the perfect time to review your budget and your savings goals. Getting passive about your budgeting system can also lead you to getting passive about your spending habits. Since January is a time of resolutions, make sure you resolve to review your financial status and begin improving it even more.

Remember the Golden Rule
One of the most golden rules in personal finance success is to spend less than you earn. In the past twelve months, there is a good possibility that your income has changed for the better or for the worse but you may not have adjusted your budget or your savings goals accordingly. Review your income and your expenses. Your regular financial obligations may have also changed in the course of a year. Sit down with a fresh notebook and refigure your finances.

Get Committed to Saving More
If you went through the past year but didn’t bank your work bonus or meet your previous savings goals, it is time to step up and make a bigger commitment. If you’ve been working on a budget, you are likely used to the guideline. Start analyzing the amount you have saved then make a list of the other things you should be saving for in your life. As a year passes, you are one step closer to retirement age or kids going to college. Re-evaluate goals based on the what happened in the past and what you are expecting in the future.

Re-Evaluate Your Expenses
At some point you may have had to cut back on certain expenses to make your budget work. Now that you have survived a year without some luxuries, you can likely try again to cut out some things you don’t need in order to save money you do need. Take a look at how expenses have changed. Note which services (cable, phone, etc) have gotten higher and start looking for better deals. Ditch memberships and other activities that charge a monthly fee if you haven’t used them throughout the past year.

Review Your Services
There are a lot of changes in many industries so there is good reason to review some of the services you are using like your bank, who may have raised or added fees to services that were once free. You may also want to consider refinancing loans, including your mortgage, if your credit has improved in the last twelve months. Many individuals just take for granted that they are using the same people for years at a time but never take advantage of the growing deals stemming from stiffer competition.

Get Everyone Back on Board
A new year means the family is a little older. Kids may be more understanding of their role in the family budget. Hold a little family meeting and go over the finances with everyone involved on a level at which they can grasp. Discuss family members savings wishes (vacations, new television, etc…) and involved everyone in the importance of sticking to a budget as a family.

Budget Friendly Tips For The Holiday Season

It is hard to believe it is once again time to prepare for another holiday season. According to recent survey results, this year consumers are gearing up for the end of the year season with mixed feelings. Many people feel more confident in the direction the economy is heading, nevertheless the impact of the recession has changed the way consumers manage their money. With that in mind, it is possible to move forward this holiday season and enjoy the traditions that make this time of year special to many families around the world. This may include gathering for special events and exchanging gifts. You can participate in these annual events while staying within your budget with these helpful tips.

 

• Review your budget- This step seems obvious enough, yet each year some people get so caught up in the spirit of the holiday they forget to consult their budget to see how much money they can realistically afford to spend. To avoid post holiday blues, take a few moments to look at your budget and determine how much you can spend without going in debt or breaking your budget.

• Set realistic limits- If you are trying to save money or stick to a budget this holiday season, set limits on how much you will spend on gifts and other costs associated with the holiday. Establishing a limit will help you stay within your budget and not go overboard with holiday purchases. You also have the opportunity to save money in advance if you know what you will be spending. It is important to set realistic spending limits. It is better to guess high and come in below that amount than vice versa.

• Get creative- With a little time and imagination, you can make great gifts at home that your friends and family will love and remember for years to come. If you need ideas, visit your library or choose from hundreds of gift ideas available online. Homemade gifts are a great way to save money without skimping on the quality of your gift. Seasonal decorations are popular and sometimes expensive. Save money by making (or giving) your own holiday decorations.

• Share expenses- Ease the financial burden of large gatherings or big ticket presents by dividing the cost among participants. This strategy can be applied to company parties, celebrations between friends or annual family reunions. Invite out of town relatives into your home versus a hotel room or ditch the traditional catered affair in lieu of an informal potluck dinner.

• Start new traditions- Most people would agree that many popular holiday traditions celebrated today have become much more commercialized than the traditions shared by our ancestors. Now would be the perfect time to bring back family traditions that may have been replaced over the years with expensive, materialistic traditions. Remind yourself and your family the true reason for celebration and reinstate or start new traditions that do not have a hefty price tag attached.

 

Consumers are hesitant to jump back on the band wagon of spending hundreds or thousands of dollars in a few short weeks, only to have to pay for those purchases for months to come. If you want to save money and still enjoy all that the holiday season has to offer it is not only possible but relatively easy with a little forethought and preparation.

10 Places to Look When Cutting Expenses

It’s hip to be cheap these days.  With the downturn in the economy, the old fashioned virtue of frugality is making a roaring comeback.  While most people are penny pinching, no one wants to live a completely spartan lifestyle.  There are ways to cut back on expenses without eliminating the joy of living. 

1. Save on groceries.  Most of us spend too much on groceries that end up spoiling. Eat what you buy and buy what you eat.  No matter how much you spend on food you can cut back and not starve.  Plan meals for the week, eat at home the majority of the time, and make a grocery list that you stick to.  Use coupon sites like thegrocerygame.com to save up to 60% on each shopping trip.

2. Save on clothes.  Consignment and thrift shops have come a long way.  You can find deals on brand new designer labels at a fraction of the cost of retail. These shops are popping up all over. Check to see if you have one in your area.

3. Save on entertainment.  We can’t just work, eat and sleep.  Entertainment is an important part of life.  Save money by checking out movies from the library.  When you do go out to eat, use coupons like The Entertainment Book, or register with restaurant.com that dining out won’t eat up your savings.

4. Use what you have.  Instead of buying the latest trends, use what you already have.  While you might not be popular with the Joneses, you’ll have extra money in your wallet which is more important anyway.

5. Save on energy.  Use compact florescent bulbs.  They lower bills and last longer than traditional lighting.  Talk to your power company about average billing.  It will keep you from having surprises during the high cost summer and winter months.

6. Save on exercise.  Drop your costly gym membership.  Lace up your tennis shoes and run or walk outside.  Purchase an inexpensive set of weights.  Check out garage sales, freecycle.org or craigslist.org where you can find deals on slightly used tred mills or stair climbers.

7. Save on credit card interest.  Contact your bank and re-negotiate your interest rates.  You never know what they will do for you until you try.

8. Save on books.  Libraries often have the latest bestsellers and also have frequent community used book sales. 

9. Save on gas.  Plan a day to run your errands. Gasbuddy.com can show you the lowest gas prices in your area.

10. Save on all new expenses.  Before you buy a non-essential item, wait 24 hours to think about it.

Cutting expenses does not have to be painful.  Practicing the art of frugal living brings freedom and peace of mind; not to mention more money in your wallet.
.

Should I Pay Off Credit Card Debt with Home Equity?

When consumers get backed into a corner financially, they begin to look for ways out.  It is not a bad thing to examine all of your options.  In that examination process, you need to consider the consequences of your choices.

In some cases, it might make sense to pay off your credit card debt with a home equity line of credit.  Here’s why:

Lower Interest Rates.  By lowering your rate, you can apply more of your payments to the principle so that you can pay off the loan sooner.

Stop the Snowball Charges on Your Credit Card Accounts.  Fees and other charges are likely adding up on your account every month and every time you look at them your heart sinks.

One Monthly Payment.  Consolidating your credit cards in this manner helps you manage your money easier by making only one payment to one place every month instead of to multiple accounts.

Those are the reasons that it makes sense to pursue this as a financial step to getting back on your feet.  However, there are consequences to doing this and you need to understand what can happen as a result of your actions.

Credit Cards Build Up Again.  If you keep using your credit cards after you have paid them off, you will eventually find yourself in the same position only now you will have a huge home equity loan balance, too.

Home Equity Becomes Like a Credit Card.  You start to use your home equity line like a credit card for frivolous purchases of things you really do not need.

Here is how to prevent these unintended consequences:

Close Your Credit Card Accounts.  Get rid of the cards by cutting them up into pieces.  Change your mind about credit and how you use it.

Do Not Use your Home Equity for Purchases.  As mentioned, stay away from using the home equity line of credit to make purchases.  Concentrate on paying off the home equity line as soon as you can.

Live Under Your Income Level.  Create a budget and live under it.  Make it a lifestyle change so that you do not find yourself in the same situation again.

What this question really comes down to is your attitude towards finances.  The fact that you have used your credit cards in a way that has caused you to pile up a large amount of unsecured debt reveals that you probably need some help with money management.  Find a good source of help before you take steps to relieve your debt problems.  There are great resources all over the Internet that can help you be a better money manager.  Using the advice that you hear, you can become debt-free and in control of your money.  And that is goal anyway, is it not?

Mint.com bought by Intuit (Quicken)

Intuit, the makers of Quicken personal finance software and Quicken Online, has just acquired Mint.com for $170 million dollars.

Aaron Patzer, the founder of Mint.com announced the purchase today in a blog post at Techcrunch:

Today, exactly two years after launching at TechCrunch40, I’m excited to announce that Mint.com has signed a definitive agreement to be acquired by Intuit for about $170m. Intuit, a $10b company (NASDAQ: INTU) is perhaps best known as the maker of Quicken, QuickBooks, and TurboTax.

This is a great opportunity to bring Mint’s technology and easy-to-use personal financial management system to potentially tens of millions of consumers, an eventually small businesses and banking customers as well.

What’s perhaps even more amazing about this opportunity is that we made it to this point just three years after the company started: one year to build, and two years in operation. I doubt this could have happened anywhere but Silicon Valley.

Mint was built in the Silicon Valley way. It started in my apartment, with Matt Snider and Poornima Vijayashanker. We interviewed the first real “professional,” our VP of Engineering, David Michaels in our kitchen.

Our technology was all open source, and essentially all free: MySQL at the bottom, Hibernate to avoid the need to hire a DBA, Tomcat on Apache, Yahoo’s YUI served as the base for our AJAXy goodness.

We didn’t have money for a lawyer, but no fewer than three offered to help us incorporate and accrue $25k in legal fees for a little bit of the company. We shared office space in a type of incubator, renting by the cube to avoid a long-term lease.

We didn’t have money for advertising, so we started a blog. We didn’t have money for writers, so most of our original blog content then was guest posts from other personal finance blogs, plus a couple of columns on people’s worst financial disasters.

To build demand, we started asking for email addresses for our alpha 9 months in advance of launch. Then when we had too many people sign up, we asked people to put a little badge that said “I want Mint” on their blogs to get priority access. We got free advertising and 600 link backs which raised our SEO juice.

When it came time to launch, we choose TechCrunch 40 – why pay $20k for DEMO?

We decided not to do SEM – it’s too easy and too additive. Instead, we relied on press. It’s where I spent 20% of my time. I’m spending it right now while writing this.

The net result has been millions of visitors and 1.5m users essentially for free. Mint is not inherently viral like a social network – but all good things are viral by word of mouth.

And so here we are two years later. We’ve attracted over 1.5 million users, found over $300 million in savings, managed $50 billion in assets, and helped people track nearly $200 billion in purchases. Most importantly, we’ve helped a lot of people better understand and do more with their money. Thousands of people have told us that Mint.com has helped them pay off debt, control their spending, manage job loss, and even resolve money disputes with their significant other.

Expect all of this goodness to increase after the acquisition closes. And yes, expect Mint.com and Quicken Online to remain free.

So that’s the Mint story. $0 to $170m in three years flat. While everyone else was doing social media, music, video or the startup de jour, we tried to ground ourselves in what any business should be doing: solve a real problem for people. Make something that is faster, more efficient, cheaper (in this case free), and innovate on technology or business model to make a healthy revenue stream doing it.

Without the free (for a while) lawyers, free advertising (winning TechCrunch sent us sky high right from the start), and most importantly, people who come to Silicon Valley, we couldn’t have done it in this time frame, if at all.

Here’s to the Mint team, from New Zealand, from France, Tunisia, Armenia, Ukraine, Russia, Canada, Greece, and all over the U.S. I’m proud of you all today, and I’m very happy to live in this Valley.

How will this affect the competition in the free online personal finance management tool arena?  It’s yet to be determined, but at least Aaron is saying that Mint will continue to be free.  Hopefully, Quicken Online will become a little more slick like Mint is.

Tips To Help You Ask for A Raise

When you are budgeting your income against your expenses, you may find that you are coming up short on the income side. If you have been working at your current job for some time, you may find it has come time to ask for a raise. There are some things to consider before asking for more money at your job. There are also some helpful hints for getting that raise you deserve. Keep in mind that not all supervisors automatically think about raises. Sometimes it take an employee to call to their attention that an employee review is necessary.

Before Asking For More

While many employees would love the opportunity to make more money, you need to first conduct a reality check before you venture into your boss’s office. Before seeking more money, ask yourself if you really deserve one. Have you been showing up to work on time? Do you give it your all each day? Are you a responsible employee who is looking to stay on board for some time? If you can honestly say that you have been a respectable, responsible employee, proceed on.

Research your salary. You can not just bring your boss a random number you hope to make for a salary figure. Visit your state’s Department of Labor for salary statistics in your area or other sites like Salary.com  to learn what people in your position and in your area are making.

Prepare a well thought out presentation about your job responsibilities, the work you actually do, any specific achievements you’ve made or goals you have reached since your start or your last raise. The more prepared you are going in, the more likely your boss will take note of your dedication to your cause.

While Asking

When you have sufficiently prepared yourself for the big day, schedule a meeting with your supervisor to discuss your salary. Many companies already have guidelines in place for employee reviews, many will not. If your employee does not have a set practice or has not broached the subject of employee reviews, don’t be afraid to set an appointment.

When meeting with your boss, be direct and professional. Beating around the bush about the nature of your appointment will take away from your professional appearance. It can be nerve-racking to discuss money, but if you are prepared in your knowledge of the salary you deserve, stick with the point of the conversation. Don’t let intimidation scare you out of asking for what you deserve.

After your presentation has concluded, listen to what your boss has to say. If you feel the conversation is not headed in your favor, don’t give up. Be ready to respectfully negotiate your points. If your employer will not agree to a raise at that time, ask them to provide you with a time line of when you can expect an increase. This may also be the prime time to discuss your current job performance. You can ask for specific reasons about the declination and show a willingness to comply with their suggestions. Perhaps you can also ask if there are additional opportunities for overtime where you can make more money.

If your employer is willing to increase your salary, be sure you have an understanding of how much of an increase you can expect and the date the increase will take affect. Ask for a written confirmation that outlines the terms of the changes.

If your employer will not make an immediate decision, ask them when to expect an answer. Perhaps if they need to confer with other management personnel or human resources, they will not be able to give you an answer. Be patient but hold your employer to their own date and promptly follow up soon after the day.

Regardless of the outcome, be sure to thank your supervisor for their time and consideration. Continue to remain respectful and professional.

Keep the information and the nature of your appointment with your employer to yourself. Confidentiality about your salary is important and should not be fodder for the office watercooler.

If you decide to stay, continue working to the best of your abilities and show a progressive interest in maintaining a position within the company. Depending on what guidelines were set up during your meeting or what the company’s policy is for employee reviews, be sure to follow up accordingly with your employer.

If you have been denied for more money, it may be time to take a serious look at a change in employment. Since the job market is a tough one in some fields, you’ll need to contemplate the pros and cons of staying and leaving. Consider the entire benefits package you currently have in addition to your salary. If you do decide to leave the company, be sure to not burn any bridges before you go. A good reference may be the ticket you need to get the next job.

Payday Loans – The Pros and The Cons

It seems like a simple premise – consumer needs money before payday. They can visit their local payday loan provider and get instant cash. On their next payday, the money owned back is to be reimbursed by the consumer.

Of course it sounds simple – but here comes the catch. Payday loans charge such exorbitant interest rates that a consumer that borrows once or twice may never be able to recover from it financially.  Since payday loans are relatively easy to apply for and receive, many consumers find the process simple enough that they begin to rely on the instant cash without much thought to the financial consequences.

Let’s discuss the disadvantages and the advantages of your friendly neighborhood payday loan:

The Bad

• Consumers in need of a lot of cash at any one time will not be able to have access to such cash. Typically the limit in most places is $1000.
• Consumers who borrow are required to pay back the amount borrowed plus interest at one time or face consequences to your credit. Typically, 14 days is the alloted time period you have to pay back the full amount. If you borrowed as much as you make in your pay, including interest, you will not have a pay check to fall back on that week.
• Many people do not understand clearly the amount of interest charged for a convenient payday loan. Some payday loan companies charge up to three times from what you borrowed. Many times people can not truly afford the interest charges on the amount they borrowed.

The Good

• Consumers are able to access up to $700 to $1000 in cash usually on the same day or at least within one day’s notice.
• Application process involves having a steady, paying job and that your regular pay will cover the amount you borrowed plus interest. You only need to provide basic vital statistics on yourself and have an active bank account.
• Bad credit histories do not hinder getting cash from a payday loan. The application is not extensive and can be completed in as little as 30 minutes.
• The consumer can use the cash for anything they need, whether it be for an emergency or a getaway trip.

The general consensus about payday loans is that while the convenience of the “instant” cash when you need it can be a plus, the consequences for having to pay back a loan you likely can not even afford can be severe and lead to even more financial problems for the consumer. If you are in a real bind, have no other resource for cash and are considering a payday loan, the most important thing you can do is contact the payday loan company and ask questions. Make sure you understand exactly how much you will be responsible for paying back in two weeks time. If you have financially swing the payment with interest, a payday loan may be of assistance to you in an emergency. But if you have the chose, avoid payday loans and the financial problems they can cause the uninformed consumer.

Next Page »