7 Ways to Balance Your Budget and Come Out Ahead at the End of the Month
Do you seem to be getting behind in your bills? Or is your situation like that old country song, "There's Too Much Month at the End of the Money?" Here are 7 ways to help you get up off life's financial mat and back on the road to prosperity.
Get rid of the gas-guzzler
If you drive 20,000 miles a year and the price of gas is $3.50 per gallon, you will pay $7,000 a year or $550 or so a month for gas, if your car gets 10 miles a gallon. At 40 miles a gallon you will be paying about $140 a month.
A new car may save you money in many ways plus you'll be saving over $400 a month in gas charges and you can, probably, find a new car whose payment is $200 a month. So, you will be saving about $200 a month with a new car. If you are making payments on the current gas-guzzler, you will save that much more.
Pay off your credit cards
If there is any way you can pay your credit cards, do it. By making the monthly payments only, you will never pay your credit cards off in full. Even if you have to refinance your house to do it, if you are serious about trying to balance your budget, pay off your credit cards and never use one again!
Pay bills on time
Late charges are financial killers. I know people who pay $300 a month in late charges. Pay on time no matter what you have to do to do it. When you pay late charges you are getting deeper into a hole. There is more about this subject below.
Give up one unnecessary coffee
Maybe you are not a coffee drinker but this example shows you the impact of not keeping your eye on every single daily expense. One extra coffee from your local coffee shop per day costs $60 a month. Sometimes this is the difference between paying all your bills on time or starting on the late payment route.
Maybe it isn't coffee but there is probably something you can cut out of your daily expenses that might be the difference between success and failure when it comes to balancing the home budget. Here's how:
When you don't pay a $40 credit card payment on time it will cost you $25 in late fees, sometimes more. Then if you do the same thing again next month you will be paying something else late because the extra $25 fee will cause you to be unable to pay a different bill.
As you can see, this is a compounding problem. Before you know it, you will have to win the lottery to get out of the mess. It is the little things that mean so much when you are trying to balance the budget.
Refinance high interest loans
If your mortgage interest is over 8% it's time to refinance. A $200,000 mortgage for 30 years at 8% is $1,468 a month; at 6% it is $1,200. On top of that, if you have any equity at all you can add your credit card balances to the principal you are refinancing. $20,000 refinanced would bring your mortgage principal up to $220,000. However, at 6%, the monthly payment would be $1,320.
With the old 8%, $200,000 mortgage you were paying $1,468 monthly, plus you were probably paying about $400 monthly in credit card payments. If you are a homeowner having a problem balancing your budget, look into what a refinance could do for you.
Don't worry about points and closing costs, you are tying to balance the budget because that is your best chance at stating down the road to prosperity. It is not the time to worry what you will be paying over the course of the mortgage. Once you have your budget balanced, you can look into saving 10's of thousands of dollars by paying off your mortgage sooner.
Give yourself an allowance
Give yourself a weekly allowance to use as carrying around money. Calculate how much you need for your weekly expenses and stick to it. I know people who have saved $300 a month by doing this. Think about it, $300 is only $5.00 a day for both husband and wife.
Audit your bills
Audit all your bills. For instance, take a look at your cable bill. I bet there are some things there you don't know you have but are paying for. How about your phone bill? Are there ways you can save money there? Many people can but they never knew it. Is there any way you can cut down on heating or lighting expenses? You won't know until you audit your bills.
One bill you should definitely audit is the cell phone bill. I'll bet there are families who could save $500 a month if they decided to make believe it was the 50's.
It is often no more than $100 to $200 a month, or $25 to $50 a week that spells the difference between making it and breaking it in the world of home finance. So, get organized. If you don't you could end up being road kill along the side of the road to financial freedom, but if you put your mind to it, you'll be the windshield and all those annoying creditors will be the bugs!