Author Archives: Common Cents

The “Budget Filing System”

Keeping categories separate lets you see at a glance.

Save first. Once you’ve put your savings into their allotted accounts, separate your budgeted money into three categories… Rent/Mortgage, Regular Bills, and Occasional Bills.  Open a checking account for each one.  Doing so, keeps you ‘on target’ with money in each when the bill comes in.

Rent/Mortgage:  Meaning your ‘overhead expense’ – Rent, or if you have a mortgage (which includes PITI (Principal, Interest, R.E. Taxes, Insurance), and Condo Fees if you own a condo.

Regular Bills:  Meaning monthly bills, the ‘Have to’s’ … Heat, Light, Food, Health Insurance Premiums, Phone, Car or transit costs, internet.

Occasional Bills: Meaning annual, semi-annual insurances, RMV excise tax etc.  Clothing, entertainment, gift giving are in this category too, however, these can be trimmed to the bone, or omitted.  Get along with the clothing you have, Drastically cut entertainment and gift giving. Your goal here is to get out of debt, save every penny you can.  You can do this.

After having made your budget, figure how much of your income should go in each category, and deposit that amount in the appropriate account each payday.  When paying a particular bill, withdraw it from…only…that account category.

Doing so keeps things in order. It allows you to, at a glance, know exactly if, and where, you’re falling short and the need to re-evaluate your budget…immediately.

A suggestion for all, but especially the rent/mortgage account – begin with a ‘cushion’… some extra money. Costs rise – the cushion will help while you re-evaluate your budget accordingly.

Rent/Mortgage Account -start out with, or add to it – an extra month or two of your ‘overhead’ cost….this insures the roof over your head, meaning there is excess there should condo fees or real estate taxes rise….or if your rent rises, it also means, should you move, money is there for that ‘overlap’ of the moving month, and the deposit needed for the new place.

Continually check and recheck your budget. Recalculate so there is always enough in each account….seeing at a glance where your spending can be whittled down. When done regularly it takes about 15 minutes, keeping you financially savvy and aware of where your money goes.

 

 

 

 

Are You Paying Only The Minimum Each Month?

Results of paying only minimum

You have a credit card or more than one.  You’ve spent and spent, and there are balances on each.  Within those balances are interest charges – every month, and possibly late fee charges.  The interest, now being part of the balance owed, will, next month, and every month until the bill is paid off, will add interest on the interest already there (it’s part of the balance owed). The thing is, whatever the interest rate is,  it’s a waste of your hard earned money. On most cards it’s anywhere from about 14% -28% (maybe more).

This means when you purchased an item(s) for $100.00, and when the bill came in, you paid the minimum – about $25.00, when the bill comes in next month, you still have $75.00 remaining on the item(s) purchased, but the balance due has interest added  to that amount at the rate in the credit card agreement.  Again, you pay the minimum, $25.00, but you missed the due date.  When the bill comes in the following month, you have the balance of the item(s) bought, $50.00, interest added on that remaining balance, plus the interest charges to date, plus a late fee of about $35.00.  That $100.00 item(s) are now costing you far more than that.

Adding purchases to the bill each month adds to the problem too.  By paying only the minimum each month, you will eventually be paying more in interest and any late fees than you do in your purchases.

This is how so many people get caught up in the vicious circle of financial debt.

The only way….. the only way to get out of it is to stop using credit cards, and pay off your balance(s) as quickly as you can.

If you insist upon using credit cards, and if you want to stay out of credit card debt, do not make a purchase that you don’t have the money for.  And when the bill comes due, pay the entire balance in full and before the due date.

It’s the only way to use a credit card.  It’s common sense. It can be done.

Why Am I Living Paycheck To Paycheck?

You Work Hard For Your Money – Know Where It Goes

Everyone, at some time or other, has said, “I don’t know why I have no money”….or some such phrase.  You work hard, get paid, pay the bills, and there’s nothing left.  Where…did the money go?  Good question…..do you ‘know’ what you spend your money on?  Really, ‘know’????

A good guess is you are wasting a lot of money…..without even realizing it.  So, grab paper and pen.  Make a list of ‘incidentals’…. stopping for coffee, lunches, vending snacks, entertainment, gift giving…..  You get the picture….they are anything other than necessary living expenses (‘have to’s).  Think through a few days last week. Where did you stop to get an item, and come out with a few?   Add up what you spend each week on incidentals. Surprised? Those quick stops can be costly.

Some of these items, although necessary sometimes, can be easily scaled back.  Quite often, these are the things that eat up a good chunk of your budget each month — far more than you thought.

Paying bills on time and in full, will eliminate interest charges and late fees which are a complete waste of money.

There are hidden, and easy, ways you can lower costs on other items in your monthly expenses too, which leaves more of your money going into your savings, whether it be your Retirement, Emergency Reserve 6-12 month ‘Cushion’, or Liquid Emergency Account.

Once you get the hang of it, you’ll be able to continually scrutinize your entire budget, and find some savvy ways of shaving your expenses.

 

Setting up a budget

See it in black and white

Most people truly have no idea where their money goes.  They spend, pay the bills and then wonder…. ‘where did it all go’? …. So, get paper and pen.

Make a list of all your monthly expenses….every single one of them.  List according to priority.  Any outstanding debt should be paid off as soon as possible.  Now, make a second list of all your annual expenses… such as insurance, life, home, car, excise, RMV expenses, birthday, anniversary, holiday gifts etc.  Don’t miss any.   Add them up.  The total should not be more than your take home income.

Once your outstanding debt is paid off, begin to save.  Savings should now be listed first in your budget….’Pay yourself first’. it’s an ‘expense’ which is, in truth, a gift to yourself.  And you need to get in the habit of saving.

If your expenses are less than your take home pay, kudos to you!  Keep up the good work!

If your expenses are more than your income…..common sense…..you are overspending!  You are living beyond your means.  It’s time to take a hard look at exactly where your money has been going, and make a serious commitment to cutting back, going on a spending ‘diet’.

It’s time to start backing off on incidentals… shaving unnecessary spending.  This will be easier than you think.  Really.  Start by listing things you can cut back on – even here and there, or maybe completely. Examples:  Make coffee at home 3 times a week, dine out once a month instead of once a week.  Cut out vending machine food.  These are starters, but you’ll come up with more.

Seeing it all in black and white, and where and how your money has been spent, will help get you on track to keeping your financial health in check.  It’s a matter of continued discipline, and it’s easier than you think.  You’ll be very happy you did.

Having your financial health in order relieves stress in your life.  Knowing that, should an emergency arise, you have the money already set aside to handle it.  You’ll also be able to enjoy the lifestyle you chose when it’s time to retire, because you’ve been saving for it all along.

 

I

Discipline

Let budget discipline become a habit

Once you get in the rhythm of budgeting, you become disciplined – keeping within the boundaries of it.  Honestly, it’s easier than you might think.

Your absolute expenditures are savings, rent/mortgage, heat, light, food, health, insurances.

Notice that cable, eating out, entertainment, incidentals, etc are not there.  Until you get a handle on budgeting — these can be shaved down considerably, or eliminated.  You will survive this.  It just takes some discipline, which will become a good habit.  Try it.

Any outstanding credit card debt should be paid off as quickly as possible.  By paying just the ‘minimum due’ at month’s end, will not suffice, because each month a portion of the following bill will be interest added on to the prior purchases, and so that cycle has begun and will continue unless and until there is a zero balance.  Until then you will find yourself always owing – and sadly, it’s just added debt.  You didn’t buy it.  You have nothing to show for it.  It’s ‘fees’ – interest and or late fees.  A total waste of money… money you worked for, and are now handing over to the bank.  Why are you doing this to yourself?

Until your bill shows a zero balance, do not use your credit card(s).

 

Ways To Trim Your ‘Monthly Have To Have’ Things

Common Sense ways to cut back — it can be done, saving $$$.

Heat/AC – When the heating season begins, don’t put the thermostat on what you’d have it on in Winter months.  Instead, as needed, start with 59-60.  You’ll become accustomed to that for a while.   Next month, add a degree or two – only if needed….and so on. Wear a sweater.  Before you know it, it’s Spring and begin to reverse the thermostat.  This saves $$$ over the Winter months.  In the Summer run the A/C the same as the heat, but in reverse.  Running a fan is even cheaper.  Follow the sun with your blinds – open to sun in Winter, close to sun in Summer.

Light – Proper lighting is needed for reading, project work, doing anything requiring seeing and avoiding eyestrain or falls. But when not needed, and certainly when leaving a room, shut off the lights.  Use energy saving bulbs in all light fixtures.  Night lights give off a lot of light too.

Food – Don’t waste food.  Eat or freeze leftovers. If expiration dates are coming due, cook and freeze.  Use coupons when shopping.

Phone – Make sure you’re getting the plan that fits your needs so you don’t pay extra charges.

Health Ins. Premiums – At ‘open enrollment’ check all plans and pick what works best for you.

Internet – Having internet allows you to have internet along with streaming features.  But rather than paying cable charges for channels they choose but you never use, drop the TV part of the bill.   Streaming services are available for $10 -15 a month, and gives you more than an ample variety of all kinds of shows and movies.  Each service has their own specials as well and they update often.

Car/transit costs – Keep your car in good working order. Pay your insurance premium when due, and in full, saving 5% or more.  Follow the rules of the road, avoiding tickets etc., and it also give an additional discount on your insurance premium.  Check all discounts you may be eligible for.

 

Common Cents

December 16, 2019

Howdy! We’re getting started on writing great content to share with our readers. Please stand by and we will have new articles posted here shortly.

Thanks,

The Common Cents Team