In church on Sunday, we had a great lesson about budgeting and money-managing. I thought it was a great thing to do for a single's ward, where there are a lot of young people just realizing the importance of money-managing, especially as the economic state of the country is becoming a big influence in our lives. So I have decided to adopt a few of the suggestions that I heard Sunday into my own financial plan. Here are a few of the things that struck me:
Having a budget. This is the simplest thing that you can do to help yourself manage your money, and I've heard it so many times. And I've even made budgets before, but they have been much more simple than the monthly budgets that are recommended. I have made budgets for a semester, in order to determine what I needed to earn and what I would spend for the semester as a whole (in a very general way, of course, because it was for the whole semester). I saw them as a good way to estimate costs and income, and to have a general plan. But a monthly budget is a good way to keep yourself accountable to the overall budget. Also, tracking your expenditures for the first month of budgeting was recommended so that you could see what areas of your budget for the next month needed to be adjusted so you can have a realistic budget. Tracking also ties into the next great tip I got...
Trim off unnecessary purchases. During the tracking stage, I'm sure I'll notice all kinds of purchases that I "need" but don't really need. I'm sure I'll also notice areas where I spend more than I should, even if the purchase is necessary. I can take these trends into consideration for my budget for the next month, and also just in my thoughts about purchasing things. This will get me in the habit of thinking about a purchase before I make it and saying, "Does this fit into my budget?" If there's something that I want to buy that doesn't fit into my budget, I can plan it into a future budget and save for it.
"Save for it." The concept of saving for something has a few benefits. 1) Those things that really aren't worth buying will fall by the wayside. Those things that are really important to me will be saved for and bought. This limits unimportant purchases. 2) If I save for something, this does a couple things to save money based on interest: While I'm saving for an item, the money I'm saving for it is earning interest in the bank, and when I pay for an item with saved money instead of paying with credit and paying for it later, I don't have to worry about paying interest on the money I borrowed to pay for the item. And it's only putting off the purchase a little bit. 3) An interesting concept that a guy in my ward brought up was the idea of saving for something now that he doesn't need now but that he knows he will need in the future, like a car. He has a good car, but he knows that he will eventually need a new car. Why not start saving for it now so that he can borrow less (or nothing) when that purchase becomes necessary? That reduces the amount of interest he has to pay.
Paying yourself. I've heard this idea before yesterday, but it was good to hear it again. Just like we budget 10% of our money each month to pay tithing to the church, we should also budget 10% of our income to put directly into savings. I think that this can go into several different "funds" of money for the different things you're saving for, or just one fund of general savings. Maybe, if you're earning enough, you can allot 10% for general savings, and then additional percentages for items you're saving for.
Get out of debt. They gave examples of good schedules for paying several creditors so that you reduce the amount of interest your paying on your different debts. The idea that really struck me was that I should be saving now to pay off my student loan. I have 6 months after I graduate without any interest being charged on that loan, and my goal is to save the total amount of the loan before any interest starts accumulating. So I just started planning that into my budget!
There are lots of other suggestions and helps on the church website http://www.providentliving.org/. Check it out!