| Spend less and save more? If only it was that | | | | for easier analysis. |
| easy. Most people use a very simple approach to | | | | *Income is a pretty obvious category and includes |
| this problem. They find a job that pays better | | | | all your planned income during the year. |
| and / or cut their expenses quite radically. Yep, | | | | *Fixed expenses are categories like rent, |
| just go out and find that 6-figure income position. | | | | insurance, credit card interest, and other items |
| And just like any other long-term investment | | | | that do not vary each month. |
| strategy, you should have a plan for investing in | | | | *Variable expenses include items like gas, |
| yourself by acquiring additional skills using an | | | | groceries, clothing, utilities, and vehicle |
| education plan. If you can offer an employer | | | | maintenance. |
| more skills, you will be of more value to the | | | | It is sometimes tempting to think of your credit |
| company and more eligible for increased | | | | cards as an option when you want to buy a new |
| responsibility which usually equates to more | | | | couch or go on vacation. But, the interest rates |
| money. | | | | will soon become a monthly burden on your |
| On the other hand, it becomes pretty obvious | | | | income to the point that your couch might cost |
| that if you cannot change your salary in some | | | | you twice as much as if you had saved the |
| drastic manner, your best approach is then to | | | | money and paid cash. Only if credit cards are paid |
| aggressively manage your money. | | | | off each month can the onus of monthly interest |
| Create a Budget for Success | | | | expenses be avoided. |
| Managers who create budgets for their | | | | If a budget includes an expense category for a |
| businesses know there is a mistake often made | | | | monthly savings account deposit, an emergency |
| by less successful managers. Those other | | | | fund can be built to protect you in a time of |
| managers spend seemingly endless hours creating | | | | unexpected hardship. |
| a budget for approval by a board or another | | | | Avoiding Catastrophes |
| party and then once approved, they put the | | | | While there may be a difference of opinion on the |
| budget in a file cabinet until the next year's budget | | | | specifics, everyone agrees they should have |
| needs to be created. | | | | some money set aside in case of emergencies. |
| Successful managers don't just put their budgets | | | | Without protection from a catastrophic situation, |
| in a file cabinet; they constantly review their | | | | you could end up liquidating your assets and |
| budgets to ensure any variances are within their | | | | paying penalties for their early liquidation in some |
| expectations and under control. Because they are | | | | cases. |
| able to use their budgets to identify any potential | | | | Ideally, enough money to cover your full |
| business problems; their budgets become a tool | | | | expenses for six months should be enough to |
| for success, not just another exercise in | | | | avoid potential financial ruin and the heavy use of |
| accounting. | | | | credit cards that will generate hefty interest |
| Become More Responsible | | | | payments. Make sure all your expenses are |
| Adhering to your budget is easier if you are | | | | covered like mortgage or rent, medical insurance, |
| realistic when you create it. People who create | | | | food expenses, and, yes, even some money to |
| budgets do make occasional mistakes in | | | | cover entertainment expenses. Budgeted |
| forecasting actual expenses, but they later | | | | entertainment in case of an emergency does not |
| modify those budgets to conform to the actual | | | | mean this fund should be used for |
| situations. You might find yourself doing the same | | | | non-emergency purposes. This is not a vacation |
| occasional fine tuning of your budget. | | | | fund, it is an emergency fund. |
| Budgets have three basic elements that any | | | | Make sure your emergency fund is liquid and also |
| person can use; income, fixed expenses, and | | | | earning you the highest return on your |
| variable expenses. While the budget creator | | | | investment. As this fund grows, you can |
| decides how much detail is necessary, major | | | | reevaluate how it is invested and diversify into |
| items should have a line devoted to each of them | | | | other highly liquid investment types. |