You have heard the term "living with in your means" before I am sure. Many people try to give others advice on how to get ahead in the world and one of the first things they tell you is to live within your means. This is the worst peace of advice someone can give another who wants to know how to get ahead financially. The only way to get ahead financially is by living below your means. There are steps you can take to reduce everyday expenses as well as your monthly living expenses so you can start paying off debt and begin saving for the future. Knowing how to make a budget is a very important part of getting your finances in order. The next thing you will have to do is set a clearly defined set of goals for your self. By setting up a budget and defining your goals you will then have to come up with a plan to fallow so you can successfully achieve your goals. You will have to be prepared for a dramatic life style change but making a life style change by choice is better then being forced to later.
If you have amassed a sizable credit card debt you are living beyond your means right now unless some kind of medical emergency came up and that is the reason for the debt. Either way you need to start taking care of your debt. Debt is something that you do not want to keep because you end up paying a lot more than what you borrowed by the time you pay everything off. If you do not have a huge credit card bill and do not have five years to pay on a car you are probably living with in your means right now. That is good because the life style changes you are about to go though will not be as dramatic as someone who is living beyond there means. No mater what category you fall into do not worry there is light at the end of the tunnel as long as you are willing to tighten your belt and start becoming more disciplined in your spending.
The fist thing you should do if you want to get out of debt or start a savings plan is learn how to make a budget. To make a budget you do not have to be a wiz at excel although it does help. All you need to do is take a month and record everything you spend your money on. It sound a little time consuming but if you are like most people and use a debit card you can always go to your banks website and get your transaction history and copy it down from there. It is best to do this daily so you do not forget what the transactions were for but once a week can be good enough. At the end of the month you should have a list of everything you spent money on with your debit card. Any purchase you made with cash from money you take out of an ATM you will need to get a receipt for and save it. After you account for you're spending of the ATM withdrawals and the purchases you made with your debt card it is time to add in checks you wrote for things like rent, gas, electricity, and your car payment.
When you have it all written down on a peace of paper or on the computer it is time to start categorizing them. If you are using a program like Quicken, Microsoft Money, excel or an open office spread sheet you can find budget templates to set up for your self. If you do not have a program for budgeting you will have to come up with categories yourself. Some categories you can use are: Entertainment, Food, Housing, Utilities, Transportation, Child Care, Investments, Savings, Debt Payments, and Education. Take each thing that you spent money on and put it under one of the categories you choose to use along with how much it cost. Once you are done total up how much money was spent in each category and then how much was spent total you have your first monthly expense report complete. Now it is time to find areas were you can reduce your spending. Go through your list and find areas where you are spending money that you can cut out. Make a new list with the same categories but instead of putting everything you spent money on under them only put the things you expect to need to spend money on. This is your first budget and it is what you will fallow for the following month. At the bottom of the paper next to where you put the total money you expect to spend put how much money you expect to make that month. You will need your expected expenses to be less than what you expect to make by as much as possible. Now you have to plan ways to stick to your budget.
If you cut out things like eating out and buying coffee while you are at work you can see that you can save a lot more than you thought. Starting to bring your own lunch and coffee in a thermos to work will definitely save you a lot of money. By not going out with friends every weekend can cut way down on your expenses. You do not have to quit your social life totally but you can slow it down a little bit. Maybe instead of going to a bar on Friday night invite friends to come over on Saturday to watch a game or grill up some hotdogs or burgers. Just have everyone bring something so the cost is spread out between you all just like when you go to the bars. However many times you go out and hang with friends now you need to cut that down by 50 to 75 percent.
You need to find a place to live that is more affordable then the place you are in right now. If you cannot find anything cheaper or you are currently living in a house you have a mortgage on you might want to think about getting a roommate. By having a roommate you can reduce your monthly housing payment by up to half along with your utility bills. If you are in a one room apartment you may be able to find a two bedroom apartment that is just a little more per month but less if you have a roommate to share costs. When you pick a roommate you will have to ensure it is someone who is financial responsible and willing to sign the lease with you. If you are currently living in a house you have a mortgage on you may want to rent out one the rooms you have to someone. This can help out with your house payments a little bit each month. The money you save when you do one of these things is to either go to paying off debt or go into a savings account. You are not trying to cut down your housing expenses so you have more money to spend you are doing it so you can start paying off debt or build up a savings.
The next thing you want to look at is the cost of your vehicle. If you are paying for a vehicle for five years you cannot afford the vehicle you have. Everyone likes to have a nice car but if you are in debt or are unable to build up a savings you need to get yourself a cheaper car. If you cannot pay off a vehicle in two or three years you need to look for a cheaper vehicle. You may want to look into buying a used vehicle rather than a new one. As long as you do not live in the Snow Belt where you need a four wheel drive and do not rely on hauling things with your vehicle for work purposes you have no need of a car that costs more than ,000 brand new. You can find a decent used car for around 00 and that is the rout I suggest you take. The biggest problem people have buying a used car is they are unable to get money together for a down payment so they go with a new car because they can get the whole thing financed. So if you decide to go the rout of a used car you will want to cut some costs in other areas first so you can save up a down payment. If you currently have a new car you still owe a lot of money on it go to the dealer you bought it from and see if you can reduce your payments by trading it in for a cheaper vehicle or go to another dealer and see what they can do for you. Any time you agree to make payments for four or five years on something you are tying up money you have not earned yet for quite a long time.
By not being the one trying to keep up with the neighbor you will probably end up being in better shape than they are later on down the road. If you have a lot of debt it is going to take you time to take care of it. A budget is not something that is going to fix your financial situation in a month or even a year. You will need to stick with it for the long haul if you want it to work. You need to do things smart like if you pay long distance for phone calls it is time for you to get a different phone carrier because most places do not charge long distance any more for phone calls inside of the U.S. and sometimes even Canada. If you are reading this article because you need to get your finances in order you do not need to spend any money on a cell phone or a new computer. A cell phone comes free with a service plan these days and there is no need to pay for internet access on your cell phone if you have a computer and internet access at home. If internet access comes free with the service plan great but if not you do not need it. A computer is not something you have to upgrade every year. As long as you can surf the net and run the programs you need to your computer is just fine. The only thing I recommend not going cheep on is the virus software on your computer. You always want updated internet security on your computer at all times.
By paying of your debt and setting a small amount aside in savings to build up an emergency fund you will be on your way to financial stability. You normally want an emergency fund to equal about three months salary so you have money incase something comes up like medical expenses or you get laid off. Once you have your debt under control and by under control I mean you do not have anything on your credit cards that can't be paid off in a month and you are driving a car that you will have paid off in three years or less. After your credit cards are paid off and your emergency fund is built up it is time to start investing your money. This can be either with CD's, Mutual Funds, Savings Account, and Stocks, what ever you know the most about. Do not forget to contribute to your IRA each year because you can make deductions from your taxes. The key is getting to the point you can start saving money. Never invest more than you are willing to lose in stocks or mutual funds and never invest in something you do not understand. At the very least set up a savings account with a bank that is FDIC insured. It may take you a few years to get everything under control but as long as you fallow you're plan you will be able to achieve it. The only thing you have to do is stay disciplined and not stray to far from you budget.
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