Examine your finances to avoid wasteful spending

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.

Welcome back to the payday loans money blog at personalmoneystore.com.

Continuing on yesterday’s topic in the article, “Increasing Income , Decreasing Debt | Payday Loans Blog Resolutions for 2009,” today we will continue the topic by exposing habits we possess that keep us tied to or continuing the cycle of financial debt.

Where Does The Money Go?

Having trouble seeing where your money is going? Follow this excerice to save money and eliminate debt!

Living In A Financial Fog?

Apart from the larger monthly expenses such as your house and car payments, you may be a little foggy as to what consumes the rest of your income. “Where does the money go?” is a question that is usually indicative of poor budgeting and or spending habits.

Know Where Your Money Is Being Spent

If you don’t know where your moneys is being spent, it is difficult to see the areas where you can save.

For one month, devote yourself to recording each and every one of your daily purchases and expenses. At the end of the month, categorize each into their own respective categories such as food, entertainment, home and utilities, etc. By taking a careful inventory of these monthly expenses, you will begin to see some interesting patterns emerge. These patterns will fall into two separate categories that we will call excessive spending and habitual spending.

Meet Daryl, Your Average American Consumer

For this example we are going to use Daryl, a debt burdened consumer, who has completed the above exercise, so that we can illustrate the patterns that you might expect to see when doing this exercise for yourself.

Daryl is an average American consumer with just more than $9,000 in consumer credit card debt. He has found himself paying only his minimum monthly payments at the end of the month due to a shortage of funds and occasionally he has to borrow payday loans to avoid late payment penalties in on his mortgage payment.

Before the above exercise, Daryl said that he occasionally goes out with his friends but does not buy a lot of consumer goods like his friends do. He considers himself a fairly conservative spender. He just can’t seem to make any headway on his debt. He blames his job, saying that he just doesn’t make enough to live on. So we asked Daryl to do the above exercise to see just how conservative he really is.

Daryl’s Spending Habits

Below are some of the habitual spending habits that Daryl found after completing the above exercise.

• Morning double shot espresso purchases two to three times a week before work at a cost of $4.25 each.
• Lunch twice a week at fast food establishments at a cost of $6.50 each.
• Movie once a week with refreshments costing an average of $16 each.

After doing the math, Daryl found that each month he was spending $51 on “wake up” coffee. $52 on lunch outings and $64 on movies and refreshments, for a grand total of $167.

Daryl did a little better in the excessive spending category finding only the following after completing the above exercise. But it was a big one.

• Groceries bill meeting and exceeding $150 dollars a week

This may not seem to be that much of a grocery bill, but considering that Daryl is “Batching it,” or in other words living solo, a grocery bill of $600 per month for one person is extremely excessive.

So between Daryl’s grocery bill and his habitual spending expenses, Daryl was spending $767 dollars each month.

What Could Daryl Do Better?

The advice given to Daryl after he completed the exercise saved him greatly in his monthly expenses. Here is what was suggested to improve his financial out look.

Cutting Out The Coffee

Instead of getting that morning cup of espresso at the drive-through three times a week, cut back to just one espresso a week. Better yet, eliminating these expensive cups of mud altogether by making his own coffee at home.

If coffee is not an acceptable substitute, purchasing an espresso maker would pay for itself rather quickly with the extra cash saved each week and could be considered a viable option as well.

Pack Out, Don’t Take Out!

Instead of indulging in fast food lunches twice a week, making a lunch and bringing it to work with him would save Daryl the extra money and his cardiac health too.

Spendy...and not good for you.

Subtituting the weekly movie and refreshments, with a RedBox or Netflix movie and some cheaper finger food with the friends, would eliminate his monthly dependence on payday loans.

Buy The Groceries, Not The Store

As far as groceries are concerned, Daryl could substantially lower his costs by going to the store with a planned list of needed food items, thus eliminating a lot of the more expensive junk foods he was getting before. This would lower his monthly grocery bill to the more typical average food bill for one person which should be in the neighborhood of $250 to $300 dollars.

The Conclusion

By subscribing to Netflix ($15), purchasing only one espresso each week ($17) and lowering his food bill to the higher end of the average food bill for one person ($300 dollars), Daryl will have room for beer and refreshments for movie night once a week and save $435 dollars each month.

If Daryl Can Do It, You Can Do

Looking at Daryl’s circumstances and the potential outcome,  a very small sacrifice is made for some extraordinary savings.

This shows the importance of implementing a budget or system to track your expenses each month so you can isolate areas where you can save money and regain financial territory lost to consumer credit debt.

Posted courtesy of Personal Money Store, your payday loans source.