Importance of Budgeting During a Recession
February 26, 2009 by Kori Ellis
Filed under Finance
In today’s economy, more so than ever, budgeting is an essential process. By creating a personal budget, you will be forced you to take a look at your spending habits.
Image credit: sxc.hu
By tracking your expenditures, you can then make informed decisions to meet your personal financial goals, whether they are getting out of debt, saving for retirement, or just planning a vacation.
Don’t Use Cash
No, I don’t mean you should max out your credit cards, but rather use a debit card for purchases. This will allow you to better track where you are spending on day to day items. Oftentimes, people don’t realize how much they are spending in cash or what they are spending it on. Check with your bank to make sure there are not any additional charges incurred for using your debit card.
Use a Budgeting Software
Though you can use the old pencil and paper ledger method, it’s much each to using a software to create and maintain your budget. The best free personal finance software that I have used is mint. You simply enter your bank, credit card, home loan and investment account information. Mint will pull all your balances, purchases, etc. to eliminate heavy data entry and bookkeeping. It will always be accurate, because the information will continue to be pulled automatically. You can learn more at Mint.com.
Seek a Financial Advisor
If you are in debt or looking to make major investments, seek the advice of a personal financial advisor or planner. Your banking institution may have one on staff or will be able to recommend one.
Allow for Flexibility
If you are cutting back on expenditures, don’t eliminate entertainment expenses entirely. If you make yourself miserable, you are more likely to get down or upset, and end up on a spending binge.
Look for Other Streams of Income
Review your budget regularly to find out where you can cut back. But you shouldn’t just reduce expenses, you should also look to bring in more money. If you are just not making ends meet, it’s imperative to look for other means of income. There are jobs out there. Considering taking a more “menial” jobs on the weekend or exploring freelance opportunities on the side.
Photo credit: sxc.hu
My New Years resolution was to pay off my ridiculously massive credit card debt. I did that by making up a budget for myself and sticking to it. (I had one for last year, and never paid it down by a penny). Month 2 and I’m doing strong. I actually use the “cash only” route. I take out my “allowance” for the week and that’s ALL I can spend. It helps me to plan ahead for future purchases. This way, I know exactly how much money I have at all times. And if I don’t have any, I don’t allow myself to spend it.