Personal Finance 101

Quickest way to save some money – spend lesser than your earn.

When push comes to shove, cut down on frivolous expenses like cable tv, or movie rentals, start car pooling, dump your Starbucks coffee for regular Java.

These cutbacks are just temporary. Their painful but temporary until you get some extra cash with you.

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1. Never go to the grocery when you’re hungry. You will always end up buying more than you’ve budgeted for, and more often than not, buy things you dont need. Get something light to eat before going to the super market.

2.  Buy items on Sale or during off season. For example, buy a winter jacket in June.

3.  SLEEP on all your purchases, whether big or small. This avoids impulse buying and helps you to know whether you really do need the purchase.

4. Eat out less often. Eating out daily is an expensive affair. “Take out” is cheaper than eating in a restaurent and “gourmet” frozen food is cheaper than take take-out. Of course, making your own lunch or dinner is the cheapest but if you’re like me and not into cooking, then order some take-out and save some money.

5.  Buy yourself a can of gourmet coffee from your local supermarket and save yourself the daily $3.95 Starbucks coffee. They taste the same, but comes with a cheaper price tag.

6. Use public transport whenever possible. It’s cheaper, environmentally friendlier and you might meet some interesting people. It also allows you to indulge in some music or in a good book.

7.  Buy used. Used items doesnt necessarily mean its bad. People sell things all the time, not only when its malfunctioning. People sell when they move or  when they want to keep up with the trend. Buying used saves you a lot of money. The time and effort spent in finding these offers are well worth it in the long run.

8.  Take a good look at your monthly magazine subscription and cancel any which you dont need. We always subscribe to more magazines than we need.

9.  Invest in quality. Spend the extra money to buy tools that will last a long time.

10. Make use of your local library, its a gem of a place for book worms like you and me.

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Saving every single cent to pay off all your debts isnt really a good thing in the long run. Do you really want to spend the next 10 years diligently paying of your credit card bills and others, wihtout going out for a single vacation or taking the family out for a dinner every month?

Paying off your debt is very important as the interest charges alone is enough to kill your future. But I have been around enough to know that you can have a life while managing your debt.

It’s called Buckets. And it’s simple to set up.

When you get your pay check at the end of the week or end of the month, divide them into your buckets. For example, you could have the following buckets:

Myself – 10%
Rent and Utilities – 35%
Credit Card Debts – 20%
Vacation – 5%
Dinner – 5%
Misc – 25%

The 5% that you allocated monthly towards the vacation and dinner bucket will build up to a point where you can take yourself or your family to a dinner every month or two; or a vacation each year.

By allocating your funds in this manner, while still reducing your debts, allows you to have a QUALITY life. Yes, reducing debts is your main priority but this shouldn’t stop you from living a life. By not over spending and diligently filling your buckets every month, you can live a good life while being on the path of financial freedom.

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If you find yourself making interest payments every month on your credit cards and want to eliminate this type of debt, your first step should be to assess your income and expenses. Total your monthly expenses and subtract them from your income. This is your disposable income after expenses, the amount you have to spend or save.

The next step is to stop charging items on your credit cards. Pay cash for goods and services, then analyze your credit-card debt. Determine which cards charge you the highest rate of interest. If you carry a balance and have credit cards with high interest rates, you are wise to look for a card with a lower rate and transfer your balances. Some cards will give extremely low rates for up to six months to attract new customers. You may wish to transfer your balances several times until you have your balance paid off.

If you are struggling to pay off credit-card debt, consider selling items you no longer need or replacing expensive luxury items (such as a pricey vehicle) with a less costly one. Many consumers find they can eliminate luxuries such as cellular phones, multiple phone lines (and optional calling features), cable television, high-speed Internet access, multiple vehicles and seldom-used sports equipment such as boats, all-terrain vehicles and snowmobiles.

Use the cash raised or saved to pay off credit-card balances. When your finances improve and you have money in the bank, you can then purchase another luxury item if you think it’s a wise choice. If you must finance a large-ticket item and you have a stable, reliable source of income, consider taking out a home-equity loan on your residence instead. You’ll likely find the interest rate to be much lower.

After obtaining as favorable an interest rate as possible and eliminating costly luxuries, rank your credit cards in order of their interest rates, and use your disposable income to completely pay off the card with the highest rate. Once you pay that one off, close that account and destroy the card. Then focus your attention on the next card, and continue doing the same until you have paid off all your credit cards. Once your credit-card debt is gone, you’re much better off with only a few cards—not the dozen or more carried by so many people.

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