Guide To Personal Finance
Whether or not the economy is strong or weak, consumers need to be smart when handling their personal finances. A smart plan on saving money can help consumers that have tight finances, and can also allow consumers that ability to afford extras such as trips, new cars, furniture, appliances and personal luxury items.
As consumers we may not have control over the global economy, gas and oil prices, unemployment rates and interest rates, but we do have some control over our financial lives. Some of the measures that consumers can take include controlling your budget, being a smart shopper for loans and being on a dedicated savings plan for long term goals such as college and retirement.
One of the best ways to get control of your finances is through proper budgeting of income and expenses. To get control you need to gather information on income and expense and put yourself on a budget.
The first step would be to determine how much income you have on a monthly basis. When calculating income, you need to consider only income that is regularly received. Calculate regular payroll income and any other income you regularly receive. Don’t add in other sources such as gifts, lottery winnings and other non-regular sources. Once you have you have all of your sources, this is the amount of money you have available to spend on bills and expenses for the month.
The next step is to determine what you are spending every month. These expenses would include mortgage or rent, car payments, utility bills, credit card bills, gas expenses, student loans and cell phone bills. In addition, you need to determine that amount of food that you need to purchase each month, amount of miscellaneous expenses each month, such as gifts, going out for coffee daily and so on. Also, make sure you have a category for entertainment expenses such as going to movies, concerts, books and other similar costs.
Once you have calculated your monthly expenses, subtract it from the income to determine what – if any – is left over. This figure is what you should be saving. If this figure is zero or a negative number, you need to re-visit the expenses and see what if any can be cut out or reduced.
- Budgeting Resources
- Budget Information
Shopping For Loans
All loans and all lenders are not equal. The interest that you pay at one lender for a loan may be different than another lender for the same loan. So, it pays to shop around for the best rates that you can get. A savings of even .25% on a loan can save hundreds or thousands of dollars over the course of the loan depending on type of loan, term of loan and amount of the loan.
Another key factor when shopping for rates is the fact that many lenders use risk based pricing. This means that a borrower with a good credit standing (credit score) will have a lower rate of interest than a borrower with a bad credit standing (credit score). This can have an impact on the amount of interest that is paid on a loan, with the possibility of saving thousands of dollars by having a better credit score. So, it is important to get and keep a good credit standing. If you have had problems in the past with credit, by paying on time and keeping everything up to date, you can re-build your credit.
The Importance of Saving
Everyone needs to save money for one reason or another. It may be for short term savings goals such as a vacation, new video game system or purchasing personal items that are out of our normal budget. Other goals are longer term goals, which can include purchasing a new car, new house, saving for college or even saving for your retirement.
Whatever your goals are, it is important to set up a dedicated savings routine. There are several ways to accomplish this, but one of the easiest is to incorporate saving into your monthly budget. First determine how much you need to save and when it is needed. For example, if you need to save $1,000 for a vacation that is 6 months from now, simply dividing the amount you need by the number of month you have to save will give you the answer of what you need to save each month, or in this example you would need to save $167 per month.
To build this savings into your budget you need to find where in the budget that money is coming from. For example, if you can spend less on entertainment or miscellaneous, this money can be used for your savings goal. Most of the time, simply by reducing or eliminating non-essential expenses, can give you the money that you need to save. Just cutting back on the morning coffee or bringing lunches instead of buying can give you money that can be used elsewhere.
Take control of your personal finances by using some of the methods described above. Regardless of the economy, by following some of these common sense rules you should be able to meet your financial goals.