Budgeting 101: more FAQ’s

Posted by admin Filed in Personal Finance on Tuesday, July 28th 2009

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How do I save for the “big-ticket” items?

Aaah, the Spend It section. I personally love this part – and who doesn’t? To be able to buy those luxury or “big-ticket” items, you first need to go through the Save It stage. Forget about 0% interest, or the store saying, “We’ll pay your first month’s payment”, let’s be responsible and save for the things we want and pay for them in full. For example, let’s say we want a new flat screen TV and it will cost $2,000. Using the budget, we have to find things that we won’t spend so much on so we can save money to buy that item.

By looking at our budget, I can show you how to save for it in 6 months just by cutting the budget down. No extra jobs, no garage sale. Here’s how – these are things you’ll need to sacrifice for 6 months in order to get that awesome TV:

-Cancel the gym membership (savings: $49)

-Cancel the XM radio (savings: $13)

-Agree to go out less for 6 months (savings: $100 from the Entertainment category)

-Choose not to buy any clothes for you for six months (savings: $75/mo)

-Sit the family down and tell them that the vacation this year won’t be as great as last year, but we’re getting an awesome TV instead (savings: $100/mo from the vacation category)

- Only use half of your allowance each month (savings: $50)

The result = Savings of $387/mo.

It will take you just over 6 months to save up for that TV. Take that big pile of cash into the store and negotiate yourself a discount or some free speakers by waving that pile of green around. You’re right in thinking that it took some discipline to get here, but isn’t that better than signing up for the 5 year plan and still be paying it off when the thing may have been replaced by another TV?

How can I pay off my debt as fast as possible?

Forget the radio commercials that’ll tell you that you can choose to negotiate your debt and only pay 50% of what you owe. You’ll come out with trashed credit that will haunt you for a long time, and possibly having to pay more debt than you originally owed.

Paying off debt as fast as possible isn’t as hard as it seems - on paper! Imagine that you want to pay off $24,000 of credit card debt / student loan. Imagine you could have either of these goals accomplished in one year. That’s the mentality you’ll need to have when you pay off your debt. Let’s look at it practically; I’ve adjusted our budget to save $2,000 a month.

You’ll notice that we’ve stopped retirement contributions. This is only for a temporary period of time while you pay off that debt. As long as you promise to yourself that you won’t run up the debt again, then this can be an affective method to paying off the debt as quickly as possible. Once the debt is paid, then start contributing to your retirement accounts again.

Think this looks like a tight budget – you’re right! But in one year, you’ve paid off $24,000 of debt. In two years, you’ll have paid off $48,000. Just imagine the feeling of being debt free and having the budget as used at the start of the article – wouldn’t life be so much easier?! Then stop wasting time – GET TO IT!

David Grant
Contributing Writer
MyWealth

Article Source:http://www.articlesbase.com/personal-finance-articles/budgeting-101-more-faqs-1073645.html

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