5 Tips for Staying on Budget

Whether you have a big family or you’re going it single, implementing a budget can help you plan for the future. Unfortunately, staying on task can be a financial challenge for most people, especially in today’s economy. The following five tips can provide guidance on how to stay within the budget that you’ve set for yourself.

Open Up a Savings Account

If you have big expenses coming up such as a new car, you’re going to want to save up for a down payment. For individuals looking for tools on how much to save, useful monthly car payment calculators can determine how much you need to put away in your savings account. When you get tempted by costly luxuries such as your daily java habit at the local coffee shop or a new pair of shoes, just imagine how much better you’ll feel when you see the balance on your savings account increase with every dollar you put away.

Try Using Cash

Being financially impaired can have a major impact on your health and wellness. If you’re looking to gain control of your credit card debt, you want to try using cash instead. Set your mind into thinking that the amount of money that you’ve drawn out of your bank account is all that you’ll have to spend for the week. This will help you to use the funds that you’ve taken out on necessary items. It’s just too easy to swipe your credit card on unnecessary purchases such as shoes, dinners out and tickets to a concert. If you have anything leftover by weeks end, you can put the funds left over into your savings account.

Ditch Bad Habits

Bad habits such as smoking and drinking can be costly on your budget. Instead of spending your hard earned money on cigarettes and booze, you can utilize the money saved on other expenses for the month. In addition to paying off your bills, you’re sure to see your health improve. Because you’ve kicked your nasty habits, you may also qualify for lower healthcare costs down the road.

Share Your Plan

If you have other family members within your household, you can share your savings plan. While you may be on target to save money for the future, a spouse with bottomless spending habits can set you back, especially if they rack up credit card debt. Children can also catch the savings bug by sharing in the responsibility. The money saved at the end of the year can be used as a reward for the family.

Pay Down Debt

Credit card debt can take forever to pay down, especially if you’ve lived well beyond your means. To get out from under the burden of your debt, select the credit card with the highest interest rate and pay it off in large increments. If you’re budget is already stretched to its limits, simply pay as much as you can without compromising your other bills.

Balance Your Bank Accounts

In addition to monitoring your credit card statements every month, you should also make it a priority to balance your bank accounts once the statement arrives. If your budget is tight, a mistake can lead to overdraft expenses and other bank related charges. Monetary accounts should also be assessed monthly to ensure that the charges are warranted and hackers haven’t messed with your funds.

Analyze Your Spending Habits

Even though you’ve already made a budget, you still want to analyze your spending habits quarterly. Simple things such as going out for dinner once a week and bringing your lunch to work can help increase the amount of money that you’ve planned on saving.

 

Do Parents Have A Responsibility To Financially Assist Their Kids?

In the world of personal finance, there are a few common refrains that have been repeated so often that they’re practically considered religion. How many times have you been told to make a budget, pay yourself first, search for ways to save money, or to buy a used car? How about avoiding expensive mutual funds, making sure you buy a reasonable house, or having an emergency fund?

I’m guessing everyone reading this has heard those things before. There’s a reason why they’re suggestions that dominate our space — they work.

Another common mantra is how foolish it is for parents to financially assist their adult children. This likely comes from the book The Millionaire Next Door, by Thomas Stanley and William Danko. According to the authors, most millionaires they interviewed shared a few different traits, including owning their own businesses, a tendency to embrace frugality, and careers in blue collar industries.

These millionaires also shared a couple of other important attributes. They were almost always self-made, and they almost never financially helped out their adult children. According to the millionaires of the book, creating a situation where adult children depend on their parents for cash is a pretty terrible idea. By giving adult children a source of steady unearned income, Stanley and Danko argued, these millionaires will all but ensure their wealth won’t last beyond the first generation.

The more I think about this, the more I’m convinced that Stanley and Danko are wrong. Here’s why.

Inheritance and sharing wealth

Hopefully, everyone reading this has the same attitude about potential inheritance as I do. It would be nice if my parents or grandparents would leave me a little something, but it makes absolutely no difference in my planning, savings rate, or any other financial decision I might make. I plan my life for a retirement without help.

But say we have a set of parents are in their 70s with $2 million in savings. They manage to earn 4% each year, giving them an income of $80,000. They’re frugal and live in a small house, with no interest in traveling or anything else remotely expensive. They couldn’t spend $80,000 per year if they tried.

Meanwhile, their son has lost his job. He’s done everything right, dipping into his emergency fund to cover expenses and has cut back on all sorts of stuff. He knows he’ll find another job again, since he was a good employee.

In that situation, why exactly is it a good idea for the parents to hold onto their cash? According to Stanley and Danko, a cash infusion by the parents in this situation would be the surest way for both parties to end up in the poorhouse.

But in reality, giving the son part of his inheritance right in the middle of his unemployment can turn a stressful situation into one where he can sleep well at night. It makes all sorts of sense to take money that will never get spent by the parents and give it to someone who could actually use it.

Paying for university is another great example. In today’s era of record-high tuition, crazy student loans, and advanced degrees becoming more of a necessity, it’s nuts for a parent to hoard cash while their offspring struggles under the load of tens of thousands in student debt.

I’m not saying parents should open their wallets for everything their children might possibly want. Perhaps there should be restrictions, like paying for tuition while the student takes care of the cost of room and board. Or maybe the parent only reserves financial aid for when the child has been laid off.

There are even ways for parents to help their children without just giving them the cash. They can hold the mortgage on a first house, giving a below market interest rate. They can invest the seed money into a small business, or even pay for grandkid luxuries parents might not be able to afford.

I’m convinced that many Canadians are over saving for retirement. It pales in comparison to our under saving for retirement problem, but there are still thousands of Canadians who feel like they won’t have a secure retirement unless they can be in the position to never touch the principal. By embracing that attitude, many Canadians are hoarding billions that could be put to better use today.

I think every parent wants to raise children that are financially independent of them. But the better way of doing that isn’t to withhold funds completely. Rather, parents should give strategically, with the expectation that financial assistance won’t be commonplace. It’s a good solution to a complex problem.