Setting a Household Budget and Sticking to It
Despite a growing economy, many Americans still struggle with money management at home. If you’re experiencing challenges financially, there’s hope. According to financial publisher Bankrate.com, establishing a foolproof budget is key to eliminating debt, saving both short- and long-term, and building wealth. Here’s how to do it.
1. Record all expenditures. Track all transactions for at least one month to gauge your spending habits. Record everything, including pocket change amounts like ATM fees.
2. Set financial priorities. After learning exactly how your money is being allocated, take time to evaluate what really matters. Expenses related to housing and utilities should always come first, followed by food, clothing, gasoline, recreational activities and vacations. Decide what you’re not willing to compromise on and actively look for areas where you can cut back.
3. Plan to pay down debt. In 2014, the average credit card debt landed just above $5,200 per borrower (TransUnion). The trick is to pay the maximum amount your budget will allow every month. Some people feel better if they tackle smaller debts first, which often take a shorter amount of time to eliminate, and others, like those with multiple credit card balances, focus on debts with the highest interest rate first.
4. Start saving today. Most experts agree that saving just 10 percent of your earnings annually can lead to significant wealth in the future. If you’re used to saving sporadically, set up an automated system with your online banking provider. For short-term savings goals, it’s best to place those funds in an interest-bearing account, money market fund or CD. For long-term savings goals, focus on gaining tax benefits by contributing to a 401(k) or IRA. Be sure to contribute the maximum amount allowed to your 401(k).