The TOP 5 Budget Busters: Start Saving $200 a Month Today
This guest post is brought to you by Selena, a writer for The Digerati Life, a site which covers a wide variety of financial topics from the best credit cards for rewards spending to the top online stock brokers around.
We all want to save for a rainy day, but we just cannot seem to find the money when the time comes to save it. Why? Well, it is because we are actually spending it. All of us have the capability of saving. We just have to learn to live well below our means. With that being said, here are the top 5 budget busters that prevent us from saving and building wealth.
1. Credit Cards — It’s unfortunate that many people won’t be able to qualify for a balance transfer credit card. They’re a great tool if you’ve got good credit and can pay off your card balance quickly during the intro period where you’ll pay 0% for a limited time. That would be one quick way of getting out of credit card debt. However, if you are sending payments out to credit card companies each month, and you are paying only the minimum, your balance amounts will barely budge. This is especially the case if you continue to charge on your card. If you’re unable to control your credit card debt, you will have a hard time building your savings. If you are paying 12%-18% interest on a credit card, you are already in the hole (so to speak) when it comes to savings. My suggestion? Take all the extra money you have and chunk it towards your credit cards first to get them paid off as quickly as possible. Think about your savings after you get out of this hole. Once your debts are paid off, you’ll free up a lot of money which you can then channel towards a high interest savings account.
2. Eating Out — Eating out is one of the largest drains on budgets. We choose the convenience of a drive through or restaurant over cooking a home cooked, healthier meal at home on most days. If you can cut your eating out completely or at least limit it to once a week, your budget and your waistline will thank you. A great way to do this is to plan your meals each week. Every two weeks, I sit down and plan what I am going to eat for the next two weeks. I create a menu and purchase the groceries I need to accomplish this meal plan. This saves time in deciding what to eat. It also allows me to eat healthier and save a tremendous amount of money from my food budget. I withdraw $20 from the ATM for eating out with friends and try to limit it to coffee, desserts, and appetizers. This way, I can make my money stretch, and also enjoy some social time with friends. When the $20 is gone, it’s gone.
3. Car Payments — I lived for 5 years without a car payment, and it was fabulous. I did drive an older car, but it got me where I needed to go and in the long run, it was much cheaper. Why? My taxes and insurance on an older car are usually lower because the value of the car is lower. Taking out an auto loan on an expensive car may not be the best idea. Having a car payment of $200 can put a major strain on a family that functions under a tight budget. Moreover, you are paying interest on an item that is actually depreciating each year, which is not really a great investment! It is far better to a cheap car, save your money and later pay cash when you decide to upgrade to better cars. This way, you can earn interest on your money instead of paying interest on your money. The whole point is to make your money work for you rather than you work for your money. If you take the $200 you are paying for a car payment each month and invest it in a mutual fund for 5 years at 12% average returns, you will eventually end up with $16,334. You could take half of this money and a pretty decent car with cash, and allow the remainder of your money to keep growing. Having no car payments is the way to go.
4. Cell Phones — As a financial counselor, I see many budgets from clients on a weekly basis. I have noticed that many have cell phone bills that are well over $100. What on earth are these people doing that they end up with a cell phone bill that is over $100? When cell phones originally came out, they were used for emergencies only. Now, we view cell phones as a necessity. They are not a necessity (well, unless you work in a field that needs you to stay connected for 24/7)! A lot of people have gotten through life without being easily contacted 24 hours a day. If you want an extra $50 to $100 a month, then ditch the cell phone. If you cannot ditch the cell phone, then search for a better plan. Many companies now offer unlimited minutes for a flat fee. Two great ones are Virgin Mobile and Straight Talk.
5. Gifts –- Despite what we think, we chunk a lot of change into gifts on a yearly basis. We do not really pay attention to this expense because it is not a regular monthly expense on our budgets. It is more of a sporadic expense that pops up now and again. How much do you really spend on holiday gifts? What about birthday gifts? Instead of treating these costs as last minute expenses, try to set a budget for these items each year and divide that yearly amount by 12. Then, put aside that amount of money each month to pay for gifts. Another way to do this is to purchase the gifts in advance. If you see something that you know someone will love and it is on sale, go ahead and it. I have created a treasure trunk where I keep all the gifts that I in advance. When that person’s birthday rolls around, I already have it ready to go. This is a great way to save and stay within your budget.
