What are some tips for creating a budget and sticking to it?
Provided By: Duane J. Silbernagel
It’s a common problem for many individuals — wondering exactly where your paycheck goes each month. After paying expenses, such as your mortgage, utilities, and credit card bills, you may find little left to put toward anything else.
Creating a budget is the first key to successfully manage your finances. Knowing exactly how you are spending your money each month can set you on a more clear path to pursue your financial goals. If you become sidetracked when it comes to your finances, consider these tips for creating a budget and staying on the right path.
Examine your financial goals. Start out by making a list of your short-term goals (e.g., new car, vacation) and long-term goals (e.g, your child’s college education, retirement) and prioritize them. Consider how much you will need to save and how long it will take to reach each goal.
Identify your current monthly income and expenses. Add up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, and child support. Next, add up all of your expenses. Sometimes it helps to divide expenses into two categories: fixed (e.g., housing, food, transportation) and discretionary (e.g., entertainment, vacations). Don’t forget to factor in any financial goals you would like to pursue.
Evaluate your budget. Once you’ve added your income and expenses, compare the two totals. Ideally, you should be spending less than you earn. If this is the case, you’re on the right track, and you’ll need to look at how well you use your extra income toward achieving your financial goals. On the other hand, if you are spending more than you earn, you should make some adjustments to your budget. Look for ways to increase your income or reduce your expenses, or both.
Monitor your budget. Finally, you should monitor your budget periodically and make changes when necessary. Keep in mind that any budget that is too rigid is likely to fail. Keep your budget flexible as your changing circumstances demand.
What are some strategies for paying off credit card debt?
Nowadays, it’s easier than ever to get caught up in the cycle of credit card debt. In fact, it’s become a growing problem for many Americans. According to the Federal Reserve, total U.S. credit card payments reached 111.1 billion in 2016, up 7.4% from 2015.1
If you find that you are struggling to pay down a credit card debt balance, here are some strategies that can help eliminate your credit card debt altogether:
Pay off cards with the highest interest rate first. If you have more than one card that carries an outstanding balance, prioritize your payments according to their interest rates. Send as large a payment as you can to the card with the highest interest rate and continue making payments on the other cards until the card with the highest interest rate is paid off. You can then focus your repayment efforts on the card with the next highest interest rate, and so on, until they’re all paid off.
Apply for a balance transfer with another card. Many credit card companies offer highly competitive balance transfer offers (e.g., 0% interest for 12 months). Transferring your credit card balance to a card with a lower interest rate can enable you to reduce interest fees and pay more against your existing balance. Most balance transfer offers charge a fee (usually a percentage of the balance transferred), so be sure to do the calculations to make sure it’s cost-effective before you apply.
Pay more than the minimum. If you only pay the minimum payment due on a credit card, you’ll continue to carry the bulk of your balance forward without reducing your overall balance. As a result, try to make payments that exceed the minimum amount due. For more detailed information on the impact that making just the minimum payment will have on your overall balance, you can refer to your monthly statement.
Look for available funds to make a lump-sum payment. Are you expecting an employment bonus or other financial windfall in the near future? If so, consider using those funds to make a lump-sum payment to eliminate or pay down your credit card balance.
1 Federal Reserve, 2017
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Duane Silbernagel is a Financial Advisor in Lincoln City, Oregon offering securities through Waddell & Reed, Inc., Member FINRA and SIPC. He can be reached at (541) 614-1322 or via email at DSilbernagel@wradvisors.com.
This article is meant to be general in nature and should not be construed as investment or financial advice related to your personal situation. The article was written by an independent third party, Broadridge Investor Communication Solutions, Inc. (Copyright 2018) and is provided for informational and educational purposes only. Waddell& Reed is not affiliated with www.newslincolncounty.com website and is not responsible for any other content posted to this website. (04/18)