10 Tips To Make Sure Your Financial Budget Will Succeed
Youve analyzed your past expenses, put them into spreadsheets, loaded Quicken with all of your data and come up with a budget. Now what? The tough part! You actually have to stick to your budget and put your plans into action. This is easier said than done. In many cases you will have forgotten about your budget and your financial goals 6 months or a year down the road. How do you keep this from happening to you?
Heres how. Make sure you follow some of these tips below so this doesnt happen to you.
1. Create a budget with realistic targets Lets say one of your budget goals is to not eat out for lunch or dinner on a regular basis. If you are honest with yourself you may find this to be an unrealistic goal. Sometimes its a nice break to eat out and have a relaxing rewarding evening. In other words, dont set the bar too high. Drastic and unrealistic goals are one of the surefire ways your budget will not succeed.
2. Budget for expenses that dont occur on a routine basis Make sure you give consideration to expenses that occur once a year, such as holiday presents, birthdays, vacations, weddings, car maintenance costs, etc. These expenses dont occur every month and they will bust your budget plans wide open. Make a list of these events on a calendar and put a dollar figure to them. Place them in the month they are expected to occur so you can plan in advance how you will pay for them. The regular routine expenses are not the reason your budget will fail. It is these gotchas that will wreck havoc on your budget if you dont plan for them.
3. Put your budget in writing Take the time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. Dont assume that your financial future will take care of itself by making a simple mental note to yourself. If you have your budget goals detailed in writing you can review and remind yourself weekly and monthly of your financial goals.
4. If you have a bad month or week, dont give up! Lets say you have been reaching your budget goals for three months. In the fourth month, for whatever reason, you didnt reach your budget goals. Maybe you even stopped trying to stick to your budget! If this happens, dont just throw your hands up in the air and admit to failure. Everyone falls off the wagon sometimes. Your budget is a journey. There will be bumps in the road, so the key is to realize that everyone makes mistakes. This relates to a story I like about a great old time golfer named Walter Hagen. Before each round of golf, he told himself that he would have 4 or 5 bad shots. During the golf round, if he hit his ball into a bunker, he would tell himself, There is one of my bad shots that I was expecting, hit the ball out of the bunker and move on. It didnt phase him one bit because he had knew there would be some bad shots in his round.
5. Adjust your budget over time This one is a biggie! It can take months or even years to fine tune a personal budget. When you initially made your budget plans, you probably had to guess at some of your figures. They might not have been in touch with the realities of every day life. For example, you may have underestimated your monthly grocery or utility bills. If this happens, analyze all of the underlying money that was spend in this category to see if your initial estimate was unrealistic. If it was, try to come up with a more accurate number and then to stick to that new figure. It is this type of adjustment that is one of the keys to making sure you can stick to your budget.
6. Review your budget every month This is where you will make any adjustments that are needed. Set aside the first day of each new month to review your income and expenditures and match them to your budget goals. By actively reviewing your finances and comparing it to your budget, you can adjust your spending habits. This gives you a chance to analyze areas that exceeded your budget expectations and make the adjustments in your spending habits or your budget. The goal here is to not forget about your budget. One tip that has worked for me is to put a printout of my basic budget goals on the refrigerator. That way every day, several times a day, I would notice my budget goals sheet. I may not read it every time, but I notice it and it reminds me that I need to stick to my budget. That is why tip number 3 is so important.
7. Set specific short-term goals Lets say one of your budget goals is to have all of your credit card bills paid off in two years. If your credit card balances total $20,000 that would be $10,000 a year. Divide that number further into quarterly reductions in your credit card bills, in this case $2,500 every 3 months. Now, this is a more tangible budget goal to shoot for isnt it? I find that when I divide intermediate and long term goals into short-term tangible stepping stones, I am able to feel a greater sense of accomplishment and am more likely to succeed. This brings us to number eight
8. Reward yourself Thats right! Treat yourself when you reach your some of your short-term goals. Since your financial budget is really a journey, take some time to smell the roses on your way. Sticking to your budget should not be a restrictive, unpleasant experience. Not only should you take the time to enjoy your financial accomplishments along the way, but use part of your budget for fun things that you enjoy. Just make sure your rewards dont end up breaking your budget!
9. Pay yourself first Im sure that one of your budget goals is to save and invest a portion of your income. One of the keys to make sure you succeed at this is to do what the IRS does with your paycheck, take it out of your discretionary income immediately. This way, the money is saved away right off the bat. Move the money immediately into a savings or mutual fund account. Many mutual fund companies can setup automatic deductions from your paycheck. Despite your best intentions to save, the hectic, daily demands of life can reduce the amount you are able to save.
10. Attitude is everything When most people think of a budget, they picture restrictions and pain. Almost like a diet. You know what happens with most diets? They dont seem work for long! First, if your budget is too strict, too restrictive on your spending, it wont work either. However, you will need to limit your spending in some areas and this will take some adjustment in your attitude. I found that when I am feeling limited and sorry for myself when I cant purchase something that I want, I remember my financial goals I set with my budget. I think about the satisfaction I feel when I reach those goals. Over time, you find that you dont want to disappoint yourself by breaking your spending goals on a spur of the moment purchase. Now, I actually get more pleasure knowing that I am reaching my budget goals when the thought of an impulse purchase crosses my mind.
If you follow these tips, your budget plans are more likely to be a great success. By taking some simple steps you will find that living within a budget is not as tough as you imagined. It can actually be fun and rewarding!
Many of the brightest and hardest-working marketing and advertising people in the country are obsessed with getting you to spend money and, if necessary, to go into debt to do so. Absolutely all the media that reach you every day are designed to get you to spend money. In order to save money in this environment, you will need determination to withstand the constant pressures to spend now.
What is it that separates those who are successful from those who are not?
Successful individuals have a strong personal vision of what they want and why they want it. That vision gives them the strength to stick to their strategies even when doing so is uncomfortable. It gives them the determination to persist when they are discouraged. This is the same characteristic of women entrepreneurs and is the reason their new, small businesses are successful.
The 401k Plan
Today, the 401(k) plan has become the main investment vehicle for working women to save for retirement. But many dont take full advantage of their plan, and this could leave them with a lot less at retirement. Here are some steps we believe you can take to improve and eliminate any retirement worries about whether or not your retirement will be pleasurable or public charity; or whether you will have all the free time to spend with your family or friends.
1. Increase your contributions to the maximum that you can manage. Many women contribute just enough to take advantage of their employers matching contributions, and then they stop. By adding more to your account, beyond the matching contributions, youll end up with more in retirement.
2. Invest at the start of each year instead of taking a little bit out of each paycheck. Nothing in the law says you have to invest in a 401(k) plan a little at a time, from each paycheck. By investing early, youll put your money to work sooner for your benefit.
3. A few years ago it was reported that more than 30 percent of the money in 401(k) plans was invested in money-market funds or similar accounts. For investors nearing retirement, that may be appropriate. But most workers in their 40s and 50s need growth in their retirement investments. Put more of your investment fund in equities and less in money-market funds.
4. Research indicates that over long periods of time, small-company stocks outperform large-company stocks. Since 1926, In the equity part of your portfolio, shift some of your money into funds that invest in small companies. Dont put your entire equity portfolio in small-company stocks. But consider investing at least 25 percent of your U.S. equity investments in that fund.
5. Numerous studies have shown that value stocks outperform growth stocks. According to data going back to 1964, large U.S. value companies had a compound rate of return of 15.1 percent vs. only 11.4 percent for large U.S. growth companies. Among small U.S. companies, the difference was even more striking: a compound return of 17.4 percent for the value stocks vs. 12.1 percent for the growth stocks. Dont put your entire equity portfolio into value stocks. But if theres a value fund available to you, consider investing at least 25 percent of your U.S. equity investments in that fund.
6.Rebalance your portfolio once a year. Your asset allocation plan calls for a certain percentage to be invested in each of several kinds of assets. Rebalancing restores your asset balance and allows for the possibility that last years losers may be this years gainers. Diluting your diversification actually increases risk in your portfolio over time, which is a result thats just the opposite of what most investors want.
7.Without compromising proper asset allocation use the funds in your plan that have the lowest operating expenses. Choose funds with low turnover in their portfolios.
8. Dont borrow or make early withdrawals from your 401(k) unless that is the only way to respond to a life-threatening emergency. Furthermore, if you take an early withdrawal before you are 59.5 years old, your withdrawals will be subject to a 10 percent tax penalty (in addition to regular taxes) unless you are disabled. Just dont do it.
9. If you leave your job, youll get a chance to roll over your 401(k) into an IRA. Take that chance. In an IRA, you have the same tax deferral as a 401(k), and youll have the flexibility to invest in virtually everything you can get in a 401(k), plus much more.
10. Heres the most important thing you can do to maximize your 401(k): Keep your contributions automatically payroll deducted, and make them no matter what. Its simple, but its not easy. Half of the households in the United States have net worth of $25,000 or less. In a typical year, about two-thirds of U.S. households do not save money.
Remember, to be successful, first, imagine your early retirement; the Caribbean condo, the yacht, the new Lexus. Luxury and pleasure as far as your eyes can see. Create a strong vision, and then dont let go. The power of a clear, strong vision applies to more than just your retirement savings. Let your vision shape your life, instead of the other way around, and all of the time in the world can be yours. You wont be spending your Golden Years working at the Golden Arches.