Frugal Finance Part II: | When to get Payday Loans

Frugal Financing Part II

Welcome back to Part II of the “Frugal Finance” series on the payday loans money blog. If you are just joining us, in the first part of the discussion we covered the process of determining your net worth by subtracting your personal liabilities such as outstanding personal loans and consumer credit card balances from the total value of your assets. Your assets are things you own such as the equitable portion of your home or car, checking and savings accounts, stocks and bonds, or retirement accounts such as a 401k.

Purpose of Establishing a Baseline or “Net Worth”

The purpose of identifying your financial baseline or net worth, if you remember correctly, was to compare your future financial positions with your current financial position.

This will allow you to see if you are making progress in your financial affairs and therefore plan for retirement and other important financial goals in your intermediate or long term future.

The comparison also works as a motivational or inspirational tool to encourage you in your money saving endeavors. Seeing progress will help you to stay the course without getting discouraged.

Where Is Your Money Going?

The next thing that we must determine after finding out your net worth is where your money is currently going. This means that you must record each and every one of your monthly expenditures.

With a pen and paper in hand, start writing down all your known expenses, starting with your monthly bills. Once you have listed all your expenses, categorize your bills into two separate categories called wants and needs.

Be careful in your distinction here as some things may feel like needs but are really just wants. The simple difference you will want to ask yourself when categorizing your expenses between needs and wants is, “Can I live without it?”  If you can live with out it, it would be a want rather than a need.

I have included an example list below to help you determine the difference:

Example Needs

• Monthly mortgage payment or rent
• Heat, gas, electric, water and other utilities
• Car

Example Wants

• Internet
• Cell phones
• Television
• Entertainment such as movies, dinners out etc.

Compromising With Unnecessary Expenses

Looking at the want list above may surprise you as we have all grown very attached to the current generation of technology. Mobile phones, internet, and television are all things we can live without, although it seems hard to believe sometimes.

The intent here is not to cancel all your wants or optional expenses but rather to simply help you to expose those expenses that can provide you an opportunity to save extra money.

The more expenses you can trim down, the more extra cash you can save, allowing you to allocate additional funds towards your consumer debt or to a savings account so that the next time you find yourself needing payday loans, you will have some emergency funds to spare.

If you can’t bare giving up any of your digital services, then consider lowering your monthly package subscriptions to save some extra money each month. For example, if your television package is subscribed to more than just one movie package such as HBO, Starz, TMC, etc., pick a favorite and save on the rest.

Develop A Monthly Budget

So let’s recap. We established a baseline by determining our net worth, listed our expenses and categorized them according to wants and needs, now we need to develop a monthly budget.

A monthly budget will allow us to delegate funds from our total recorded monthly income to each of our needed expenses. The remainder can be allocated between debts and/or your listed wants. A monthly budget will help keep you accountable on a monthly basis to allocating funds to accomplish specific goals.

Join us for part three to learn some helpful tips on creating and maintaining a budget.

Posted courtesy of PersonalMoneyStore.com. Your payday loans source.