With the current state of the economy, it would seem that we are in for a rough ride ahead. Even President Bush has confirmed this in a recent speech, acknowledging that there are “troubling signs” in the economy.
Examples of this were demonstrated in a distinct lack of new jobs for the first time in 52 months and consumer spending in December of 2007 increased by only 0.2 percent, which is the lowest increase in six months.
The Labor Department also announced that the number of people who filed for unemployment benefits jumped up by more than 69,000 recently.
For some, the troubled times are only just beginning, while others have already been feeling the crunch. As unstable as the economy may be, there is one thing for certain; we should all come up with ways to manage our own personal finances if we are to weather tough times ahead.
But more importantly we should be able to manage our personal finances not just in the face of economic difficulty but do it in such a way that it becomes a lifestyle. Doing so will not only help you avoid the frustration of a slowing economy but also give you peace of mind about your financial health and your future.
A great part of the solution lies in our own personal spending habits and how we manage our money. One of the most effective ways to avoid a financial disaster is to formulate a realistic and workable personal budget, and most importantly, stick to it. Creating a personal or family budget is easier said than done for many, particularly if you have been used to “winging it” with your finances and have never had to formulate a clear plan for spending.
Simply getting started with a monthly budget is an important step in getting a financial grip, but once you make that commitment you’re likely to see a positive trend, not matter how bad your finances are.
Start with taking into account all your possible expenses in a given month. This will include mortgage payments or rent, credit card bills, car payments, gas or transportation allowance, 401k, school expenses, food and utility bills, medical expenses…basically everything that you can think of that you normally spend on a regular basis. Always set aside part of your budget for emergencies and depending on how cash strapped you are you can also try setting aside for leisure expenditures.
When you feel that you have covered everything, you should now take note of how much income you are pulling in for the same time period, taking into consideration every possible source of income that can contribute to the cause. Now, here’s where it gets tricky.
If you are making more money than you are spending, then you are obviously in the clear and you may even have some money left over to put into the bank or use however you see fit, however, if you are spending more than you bring in then it is obvious that you have to make some changes either to your expenditures or your income level. None of those two options are easy but cutting down your expenses is arguably simpler, so let’s focus on that.
Go over your monthly budget carefully and figure out areas that you can either reduce or cut out entirely. Obviously luxury items and leisure activities will have to take a back seat to all your other financial obligations so you should start there. For example, you may have to cut back on eating out or leisurely spending.
If you have cut out all the extraneous expenses from your budget and you still come up short, you will have to dig deeper. Perhaps the interest rates on your credit cards are bleeding you dry or your gas guzzling car is costing you a lot more than you realize.
The point is you should try to target problem areas in your monthly expenses and take steps to rectify the situation.
Constructing a good personal budget and sticking to it is the best chance you have to weather a slowing economy, but managing your money by sticking to a sound personal budget simply makes good sense, no matter what the economy.
Pay a visit to www.thepersonalbudget.com and find out how a
personal budget can help you get control of your spending, manage your money and get out of debt.
