Tips To Stay On Track With Your Budget

At some point in time, you’ve likely made the decision to put aside excuses and start making sincere efforts to improve your financial situation. You probably made some form of budget for your monthly expenses and set some ambitious savings target, only to find the perfect excuse to spend outside your budget and/or pilfer your savings. Sometimes the reason for cheating on your budget is legitimate – emergencies happen – but a truly effective budget accounts for crises.

Even if your budgeting has not gone to plan, there is still plenty of time to get things back on track. Here are our top tips for effective budgeting and saving.

Reality Check
First, you need to determine whether your budget was realistic to begin with. Have you fallen down because it was unachievable, or are you simply spending more than you should be? Many people set a budget and savings plan without fully evaluating their current finances. If you have not met your saving objectives, then this is the exercise to go through, as it sets the record straight and lays the foundation for all your financial planning.

Gather every financial statement you can. This includes bank statements, investment accounts, recent utility bills and any information regarding a source of income or expense. Next, record all of your sources of income. This could be from employment, rent or shares. Record the total take-home pay as a monthly amount.

Create a list of all your monthly expenses. This may include your mortgage payment or rent, car payments, auto insurance, groceries, utilities, entertainment and dry cleaning. Use your bank statements to ensure that these figures are accurate. You then need to break this down into two columns – fixed and variable. Some expenses are the same each month and are essential spending to maintain your way of living. Then list your variable expenses. These expenses will change from month to month.

Finally, you need to total your monthly income and monthly expenses. I hope that your income is greater than your expenses, so you have the potential to save. This means you can look at what you are doing with this excess – if the money is not going into savings, then what are you spending it on? If your income is less than your expenses, then you need to make urgent cutbacks to avoid growing debt.

Cutbacks
Once you have examined your fixed expenses, it is time to look at your other expenditures. Are these areas where quick cutbacks be made? Whether you are budgeting to stop yourself from getting into debt or budgeting to put money into savings, cutbacks are the way to free up funds. For example, are you spending all of your disposable income on meals out? Your bank statements and credit card bills will show you where the areas of overspending are. Once you have identified these areas, you can take steps to curb your overspending.

Impulse Buys
Many people who fail to reach their savings goals are impulse buyers. In order to become an effective saver, you will need to address this behavior. Impulse buys eat into disposable income and can often mean wasted money. Never act on impulse when making purchases. If you see something you want, avoid buying it right away. Take a day to decide on the purchase. If the cost is significant, search for discount sites that may sell it for less money. Become.com and Pricegrabber.com are two sites that can help you hunt out a cheaper deal online.

Keep Track
Several months have passed by and your budgeting has slipped with time. To ensure that you stay updated for the rest of the year, keep daily logs of what you spend so you get a true picture of your spending habits. This will allow you to see if you are slipping into bad habits. If you do see a pattern – take action. Do not let months pass without addressing the issue.

If All Else Fails
We all use our plastic all the time. This makes it very tricky to get a feel for what you are spending. A way to combat this is to turn to cash. Every Sunday, take out your allotted spending money for the week, work out what your daily allowance is and remember that if you over/under spend one day, it will either give you more or less money later in the week. This is an effective way to understand your finances better.

Should You Know About Debunking 10 Budget Myths

The closest many people get to budgeting is depositing their paychecks into their checking accounts and buying everything with an ATM card until the money’s gone.

While there are certain advantages to this method, such as not incurring credit card debt, there are also major disadvantages, such as not quite knowing where all that money is going and not contributing enough to your savings because there’s never anything left over.

Even though budgeting is a wonderful tool for managing your finances, many people think it’s not for them. The logic they use, however, is often flawed. Below is a list of 10 budget myths that stop people from saving as much as they could – and should. Do any of these budgeting myths apply to you?

I Don’t Need to Budget
The truth is, almost everyone, even those with large paychecks and plenty of money in the bank, can benefit from budgeting. Keeping track of your monthly income and expenses allows you to make sure your hard-earned money is being put to its highest and best purpose. For example, if you knew how much money you were spending on restaurant meals every month, you might decide that you’d rather be putting that money toward something else, like a nicer vacation.

I’m Not Good at Math so I Can’t Manage My Money
Thanks to budgeting software, you don’t have to be good at math, you simply have to be able to follow instructions. Many of these programs are free and can be safely downloaded without fear of viruses or spyware from CNET’s download.com. If you know how to use spreadsheet software, you can even make your own budget. It’s as simple as creating one column for your income, another column for your expenses and keeping a running tab on the difference between the two.

My Job is Secure
No one’s job is truly secure. If you work for a corporation, downsizing or losing your job is always a looming possibility. If you work for a small company, these concerns may not apply, but if the owner died suddenly, the company might die with the owner. You should always be prepared for a job loss by having at least three months’ worth of living expenses in the bank. It’s a lot easier to accumulate this money if you know how much money you’re bringing in and laying out each month.

Government-Sponsored Unemployment Pay Will Tide Me Over
Unemployment benefits are not a sure thing. Let’s say a bad situation at work leaves you with no choice but to quit your job. Because you weren’t laid off, leaving your job will be considered voluntary and it’s very unlikely you’ll receive any benefits. It won’t help if you decide to remedy this problem by getting yourself fired, as those who are let go for bad behavior are also very unlikely to receive unemployment assistance. On top of that, getting fired will make it harder for you to get a new job.

It Won’t Happen to Me
We all think that unexpected high bills and tragedies won’t happen to us. With the number of things that can possibly go wrong in life, hoping for the best is the most logical emotional survival tactic. However, you might lose your job, be in a car accident, get cancer or need to help a friend or family member who falls on hard times. It’s best to be prepared and hope that you’ll get to use the money for something fun one day instead.

I Don’t Want to Deprive Myself
Budgeting is not synonymous with spending as little money as possible or making yourself feel guilty about every purchase. The crux of budgeting is to make sure you’re able to save a little each month, ideally at least 10% of your income, or at the very least, to make sure that you aren’t spending more than you earn. Unless you’re on a very tight budget (and we all are sometimes), you’ll still be able to buy baseball tickets and go out to eat. Tracking your expenses doesn’t change the amount of money you have available to spend every month, it just tells you where that money is going.

I Don’t Want Anything Big so I Don’t Need to Save
This one is tricky. If you don’t have any major savings goals to buy a house, a new car or to save enough money to quit your day job and take a stab at starting your own business, it’s hard to drum up the motivation to stash away extra cash each month. However, your situation and your attitudes are likely to change over time. Perhaps you don’t want to save up for a house because you live in New York City and expect that renting will be the most affordable option for the rest of your life. But in five years, you might be sick of the Big Apple and decide to move to rural Vermont. Suddenly, buying a home becomes more affordable and you might wish you had five years’ worth of savings in the bank for a down payment.

As another example, many people thought home ownership would be forever out of reach when the housing bubble was pushing prices ever higher, so they gave up on the idea of owning a home. After the bubble burst and prices sank, however, those who previously couldn’t even afford condos sometimes had the income to afford houses. Even FHA loans require a down payment, though, so those who saved their extra money when prices were high put themselves in a great position to buy when prices dropped.

Any Money I Save Would Just be Used for Education
Yes, the catch-22 of student financial aid is that the more money you have, the less financial aid you’ll be eligible for. That’s enough to make anyone wonder if it isn’t better to just spend it all and have nothing in the bank in order to qualify for the maximum amount of grants and loans.

When you apply for federal student aid such as the Stafford Loan, Perkins Loan or Pell Grant, you will fill out the Free Application for Federal Student Aid (FAFSA). Whether you are an adult student going back to school or the parent of a student headed to college, this form does not require you to report the value of your primary residence (if you own a home) or the value of your retirement accounts. This means that if you want to save money without compromising your financial aid eligibility, you can do so by using your savings to buy a house, prepay your mortgage or contribute more money to your retirement accounts. The savings you put into these assets can still be accessed in the event of an emergency, but you won’t be penalized for them. Paying down credit card debt and auto loans can also serve as a form of saving that won’t detract from your financial aid eligibility. Just think of all that interest you won’t have to pay when your balances go down or are even paid off completely.

Another issue is that even if you employ all the legal strategies available to you to maximize your financial aid eligibility, you still won’t always qualify for as much aid as you need, so it’s not a bad idea to have your own source of funds to make up for any shortfall in the aid you’re offered.

I’m Debt-Free
While being debt-free is unusual and commendable, it won’t pay your bills in an emergency. A zero balance is better than a negative balance, but that zero can quickly become negative if you don’t have a safety net.

I Always Get a Raise or Tax Refund
It’s never a good idea to count on unpredictable sources of income. Your company may not have enough money to give you a raise, or as much of a raise as you’d hoped for, even if you’ve earned it. The same is true of bonus money. Tax refunds are more reliable, but this depends in part on how good you are at calculating your own tax liability. Some people know how to figure to the penny how much of a refund they will get (or how much they will owe) as well as how to adjust this figure through changes in payroll withholding throughout the year. Others find W-4 forms, 1040s and tax tables incomprehensible and April is always a surprise. You might be expecting a $1,000 refund only to find that you’re getting $300 – or worse, that you owe.

Solutions
If you’re still not convinced that budgeting is for you, here’s a way to protect yourself from your own spending habits. Set up an automatic transfer from your checking account to a savings account you won’t see (i.e., a savings account at a different bank from your checking account) that is scheduled to happen right after you get paid. If you are saving for retirement, you may have the option of contributing a regular, set amount to a 401(k) or other retirement savings plan. This way, you’ll always pay yourself first, you’ll always have enough money for the transfer and you’ll always pay yourself the same predetermined amount that you know will help you meet your goals. If you don’t think you have the discipline for budgeting, this is your best bet.

However, a better solution is to make this automatic contribution in conjunction with starting a budgeting spreadsheet or using budgeting software. This way, you won’t run into any unpleasant surprises, like your checking account balance reaching zero when your car insurance is due and you don’t get paid for another week.

Some Reasons Why Saving Money Is Important

If you don’t earn much and you can barely pay your bills, the idea of saving money might seem laughable. When you only have $5 left at the end of the month, why even bother to try saving? Because everyone has to start somewhere, and if you work at it, your financial situation is likely to improve over time. Saving money is worth the effort. It gives you peace of mind, it gives you options, and the more you save, the easier it becomes to accumulate additional savings.

Peace of Mind
Who hasn’t lain awake at 3:00 a.m. wondering how they were going to afford something they needed? If money is really tight, you might be wondering how you’re going to pay the rent next week. If you’re a little further up the financial ladder, you might worried about how many months you could pay the bills for if you lost your job. Later in life, the money thoughts that keep you up at night might center around paying for your kids to go to college or having enough money to retire. (Get help with college savings by reading Stop Procrastinating! Enroll In A College Savings Plan.)

As you accumulate savings, your financial worries should diminish, as long as you’re living within your means and not always looking for new things to worry about. If you already have next month’s rent taken care of by the first week of the current month, if you know you can get by without work for three to six months, if you have savings accounts for your children’s education and your own retirement that you’re regularly funding, you’ll sleep better at night. The reduced stress from having money in the bank frees up your energy for more enjoyable thoughts and activities.

Expanded Options
The more money you have saved, the more you control your own destiny. If your job has you on the verge of a nervous breakdown, you can quit even if you don’t have a new job lined up yet and take time off to restore your sanity before you look for new employment. If you’re tired of living in an unsafe neighborhood, you can move to a safer area because you’ll have enough for a deposit on a better apartment or a down payment on a nicer home.

If you get sick and need expensive healthcare that your insurance doesn’t cover, you’ll have a way to pay for it even though you can’t work while you’re getting treatment. And knowing that you have options because of the money you’ve socked away can give you even more peace of mind.

No, money doesn’t solve every problem. It you are laid off, it might take as long as two years to find a new job. Some illnesses won’t go away no matter how many procedures you can afford, and random crime can happen even in a supposedly secure gated community. But with more money in the bank to deal with issues like these, you give yourself better odds of coming out on top.

Money Working for You
Most of us put in hundreds of hours of work each year to earn most of our money. But when you have savings and stash your funds in the right places, your money starts to work for you. Over time, you’ll need to work less and less as your money works more and more, and eventually, you might be able to stop working altogether.

What does it mean to have your money working for you? When you’re first starting to save, you’ll want to put your money somewhere safe, where you can access it right away for unforeseen expenses. That means an online savings account, where you might earn 1% interest annually and not even keep up with inflation, which tends to run around 2% to 3% per year. You’ll even have to pay taxes on your meager 1% earnings. Anything is better than earning 0%, though, or not having savings and going into credit card debt, which will cost you 10% to 30% in interest per year.

Once you’ve saved three to six months’ worth of expenses in your emergency fund, you can start saving money in a tax-advantaged retirement account. That’s where the magic starts to happen. These accounts, such as a Roth IRA or 401(k), allow you to invest in the stock market. If you do it right, you’ll earn about 8% per year on average over the long run. You won’t pay any taxes on those investment gains along the way, which will help your money grow even faster. With a Roth IRA, you contribute after-tax dollars, and everything that’s in the account after that is yours to keep. With a 401(k), you get to contribute before-tax dollars, giving you more money to invest up front; you’ll pay taxes when you withdraw the money in retirement. (If you’re not sure whether it’s better to pay taxes now or later, you can hedge your bets and contribute to both your employer-sponsored retirement plan and a Roth IRA.) The third choice, a traditional IRA, allows you to contribute before-tax dollars as you do with a 401(k).

If you have a high income and low expenses, you might accumulate enough to retire in 10 years. For most people, it takes closer to 40 years. But at some point, if you save and invest regularly, you should be able to live off the income generated by your investments – the saved money that’s working for you. The earlier you start, the more time a small amount of money has to grow large through the miracle of compounding.

Information About Financial New Year’s Resolutions

Did you make any resolutions concerning your personal finances last January? If so, how did you do? Did you attain your financial goals, or was this year a total financial washout for you? While the days leading up to New Years Eve are often spent reflecting on the year gone by, the following days should be spent reflecting on the New Year, reviewing your financial scorecard for the past year, and then look for ways to improve in 2014.

There’s a good chance last year’s resolutions didn’t stick. According to a report from the University of Scranton’s “Journal of Clinical Psychology,” only 8% of us actually achieve our New Year’s resolutions. The good news about New Year’s resolutions is that you get a fresh crack at them each year. Here’s some financial changes you should resolve to make in 2017.

Calculate Your Net Worth
If you haven’t done so already, The New Year is as good a time as any for determining what you’re worth (financially, of course). Calculating your net worth is a key step to assessing your financial health and reaching your financial goals. Looking closely at all your assets and liabilities helps create a clear picture of where you are prioritizing your current spending and saving and where you need to make changes in your spending and saving habits.

It’s a good idea to recalculate your net worth each year to keep on top of your progress towards your financial goals and correct any mistakes you’re making before they create overwhelming debts. Many sites, including Investopedia, offer free tools to help you calculate your net worth. The resolutions you need to make will become more obvious after making this calculation.

Reset Your Retirement Savings
At work, you probably have the opportunity to save for your retirement through a 401(k), 403(b) or 457 plan sponsored by your employer. If so, consider that most people find it easier to max out their retirement contributions by budgeting to contribute a set amount each month.

Employer Plans

If you have access to a 401(k), 403(b) or 457 plan at work, consider instructing your employer to withhold enough through salary deferrals to ensure that you reach the maximum limit each year. If you’ll be 50 or older by December 31, bump that amount to account for the additional catch-up contributions you’re allowed to make. If you are paid on some other frequency, such as weekly or bi-weekly, simply divide the contribution limit by the number of your pay periods for the year.

Of course, you should save only amounts that you can realistically afford, as contributing more than you can afford may result in having to incur debts to cover everyday expenses. To determine how much you can save each period, incorporate your retirement savings into your regular budget.

Are you self-employed? If so, depending on your income, you can contribute to an SEP IRA, profit-sharing plan or independent 401(k) plan. And if you’ll be 50 or older by Dec. 31, the contribution limit jumps for independent 401(k)s, helping you save even more.

Don’t Forget About IRAs

Even if you’re covered under a retirement plan at work, you and your spouse can each contribute to a Traditional IRA or Roth IRA, as long as your combined taxable wages and net self-employment income is not less than the total amount contributed. Anyone 50 or older can contribute an extra $1,000, increasing the total allowable contribution to $6,500, or $541.66 per month. Keep in mind, however, that in 2017, a modified adjusted gross income of $62,000 to $72,000 ($99,000 to $119,000 for married couples filing jointly) puts you in the phase out range for deducting your traditional IRA contributions (these numbers apply if you are covered by a retirement plan at work, limits will be different if you are not, see here for more information).

Update Your Savings and Debt Reduction Goals
Creating easy access to your funds can be quite tempting, and if you are like most people, you will spend money that you can easily attain. Therefore, to help you reach your goal, be sure to transfer amounts earmarked for savings from your checking account to a designated separate savings or investment account that is not easily accessed, making it less tempting for you to spend the money that you have managed to save.

Take a few minutes now to set new savings goals for 2017, including how much you would like to add to your retirement nest egg, your children’s education fund or the down payment on your home. You should also reset how much you plan to pay on your personal loans, debts and home mortgage accounts.

And don’t forget about paying some extra principal toward your mortgage payment each month. By doing so, you’ll earn a risk-free return on that money equal to your mortgage interest rate. Plus, you’ll cut down on the number of years it will take to pay off your mortgage. However, if you must choose between adding to your retirement nest egg and paying extra on your mortgage, talk to your financial advisor to determine which option is more suitable for you.

Other Resolutions
Rebalance Your Investment Portfolio

The previous year was no different from any other year: some sectors over-performed and some sectors under-performed. Chances are that the sectors that did the best last year may not enjoy a repeat performance this year. By rebalancing your portfolio to its original or updated asset allocation, you take steps to lock in gains from the sectors with the best returns and purchase shares in the sectors that have lagged behind last year’s leaders.

Pay Down Your Credit Cards.

If you owe money on your credit cards, determine how much you can realistically afford to pay off during the year. For best results, try not to charge additional purchases on those cards while you’re trying to pay down what you owe. If you have high interest credit card balances, consider whether it would be more beneficial to pay off those high interest debts or to add to your savings.

Review Your Credit Report

Review your credit report, and take steps to repair any negative aspects. Now that you’re entitled to three free credit reports each year, there is no excuse for not reviewing what is one of your most important financial reports, especially since errors in these reports are not uncommon. That said, obtaining a truly free credit report isn’t as easy as some companies claim, so be sure you know all the terms and conditions before requesting a report. A poor credit report could adversely affect the amount you are able to save, as it could result in you paying higher interest rates on loans, which reduces your disposable income.

Review Your Life Insurance and Disability Insurance Needs

As you move through your career, your life and disability insurance need to continue to change. Give some thought as to how much protection you need and compare it to the coverage you currently have through your employer’s benefit package. Consider whether you need more or less life insurance, and whether your needs would be better satisfied by term or permanent life insurance. Also, review your disability insurance coverage to determine whether you have enough coverage.

Tips For Young Investors

Moving out of mom and dad’s house provides a great deal of freedom, but that freedom also comes with responsibilities, such as rent and utilities. Then there’s your car payment, school loans and credit card bills. You probably also have aspirations for a better car, a nice vacation and a home of your own. Of course, your social life isn’t free and many of the things that your grandparents never heard of – from Starbucks and cable television to cell phones and iPods – are luxuries that many young people can’t live without. Actually, a cell phone isn’t a luxury anymore for most of us.

Unfortunately, everything costs money. With so many places to spend it, it can sometimes be hard to have enough of it by the end of the month. If you’re new to the workforce, the distant future may seem too remote to even rate as a priority – especially when you’re just learning to balance your finances. In this article, we’ll go over how to begin working with the limited resources you have now in order to prepare for the future – you’ll be glad you did.

Retirement Seems So Far Away
You probably keep hearing about how Social Security won’t be there when you need it, but with retirement such a long way off, it’s hard to be worried. Retirement?! When you are in your 20s, retirement seems like a distant event – and it is! You’ve been on the planet for only two decades, and you’ve got probably twice that amount of time standing between you and your last day at work. So why think about retirement now, especially when there are so many other things competing for your cash?

The answer is simple. Despite the time and distance involved, the future is something that will be here before you know it. Someday, either because you’re tired of working or because your health isn’t what it used to be, the idea of schlepping off to work will no longer have the same appeal that it does today. When that day comes, you need to be ready for it.
How to Prepare
When it comes to preparing for your future, the most important step is to get started. The first thing that you need to do is make a commitment to saving money. While the long time horizon and huge amount of cash required to support yourself if you stop working can seem overwhelming, the way to tackle the task is to start small. Choose an amount of money that you can relate to – and afford – and set aside that amount each week.

Even as little as $25 a week adds up to $1,300 over the course of a year. If you invest the money, and every investment you make doubles every eight years, that first $1,300 becomes $2,600 in eight years, which becomes $5,200 after 16 years, $10,400 after 24 years, $20,800 after 32 years and $41,600 after 40 years.

While the sums are small and the math is simple, the example provides a pretty good idea of what a realistic savings plan can do for your future. To really put the power of time to work for your portfolio, find out if your employer offers an employer-sponsored savings plan. If so, and the company offers to match your contributions, you won’t want to pass up that opportunity. Not only will the money that you contribute grow, but so will the money that the company adds to the pot.

When you get a raise, increase the amount that you contribute. When you change jobs, take the money with you and deposit it in your new employer’s plan or roll it over to an individual retirement account (IRA). The important thing is to keep your money growing throughout the course of your career. Always add to the total and never do anything to chip away intentionally at your savings.

More Than Just Retirement – It’s a Lifestyle
Retirement isn’t the only financial goal that you will have. Raising a family, the need to replace your car multiple times, and simply keeping yourself fed and clothed over the course of a lifetime are also expensive propositions. To meet these challenges, you’ll want to keep your wallet fat and your expenses thin. Making this happen requires a serious commitment to a thrifty lifestyle. You need to manage your money and not let your money manage you.

Start by eliminating your bills. Make extra payments any time that you can, even if it’s only a few dollars. Pay off the highest interest items first (credit cards before school loans, school loan before 0%-interest car payment). While you’re working to pay down and pay off your bills, don’t make new bills. It’s important to avoid recurring debt, like music services, unnecessary telephone services, computer-gaming fees, magazine subscriptions, credit cards and everything else that comes with a monthly bill attached.

Even when you spend cash, be sure to buy things that you can afford. Maybe that Jaguar will have to wait until the Ford Fiesta is paid for. Or that week in Cabo could be skipped in favor of a weekend in the mountains. Regardless of where and how you spend your hard-earned dollars, just make sure you don’t spend all that you earn.

To keep yourself on a sustainable track, figure out how much you earn and how much you need to pay your bills. Make sure your bills come to less than what you earn, and make it a habit to live on less than you earn. From there, make sure that the first bill you pay each month is your 401(k) plan or other form of long-term savings, like an IRA.

Some Ways To Prepare For A Personal Financial Crisis

The thought of being hit with a major negative event that could affect your finances, like a job loss, illness or car accident, can keep anyone awake at night. But the prospect of something expensive, and beyond your control, happening becomes less threatening if you’re properly prepared. This article will describe 10 steps you can take to minimize the impact of a personal financial crisis.
TUTORIAL: Budgeting Basics

1. Maximize Your Liquid Savings
Cash accounts like checking, savings and money market accounts, as well as certificates of deposit (CD) and short-term government investments, will help you the most in a crisis. You’ll want to turn to these resources first, because their value doesn’t fluctuate with market conditions (unlike stocks, index funds, exchange traded funds (ETFs) and other financial instruments you might have invested in). This means you can take your money out at any time without incurring a financial loss. Also, unlike retirement accounts, you won’t face early withdrawal penalties or incur tax penalties when you withdraw your money – one exception is CDs, which usually require you to forfeit some of the interest you’ve earned if you close them early.
Don’t invest in stocks or other higher-risk investments until you have several months’ worth of cash in liquid accounts. How many months’ worth of cash do you need? It depends on your financial obligations and your risk tolerance. If you have a major obligation, like a mortgage or a child’s ongoing tuition payments, you might want to have more months’ worth of expenses saved up than if you’re single and renting an apartment. A three-month expense cushion is considered a bare minimum, but some folks like to keep six months or even up to two years’ worth of expenses in liquid savings to guard against a long bout of unemployment.

2. Make a Budget
If you don’t know exactly how much money you have coming in and going out each month, you won’t know how much money you need for your emergency fund. And if you aren’t keeping a budget, you also have no idea whether you’re currently living below your means or overextending yourself. A budget is not a parent – it can’t and won’t force you to change your behavior – but it is a useful tool that can help you decide if you’re happy with where your money is going and with where you stand financially.

3. Prepare to Minimize Your Monthly Bills
You might not have to do it now, but be ready to start cutting out anything that is not a necessity. If you can quickly get your recurring monthly expenses as low as they can be, you’ll have less difficulty paying your bills when money is tight. Start by looking at your budget and see where you might currently be wasting money. For example, are you paying a monthly fee for your checking account? Explore how to switch to a bank that offers free checking. Are you paying $40 a month for a landline you never use? Learn how you might cancel it, or switch to a lower rate emergency-only plan if you needed to. You might find ways you can start cutting your costs now just to save money.

For example, are you in the habit of letting the heater or air conditioner run when you’re not home, or leaving lights on in rooms you aren’t using? You may be able to trim your utility bills. Now might also be a good time to shop around for lower insurance rates and find out if you can cancel certain types of insurance (like car insurance) in the event of an emergency. Some insurance companies might give you extension, so look for the steps involved and be prepared.

4. Closely Manage Your Bills
There’s no reason to waste any money on late fees or finance charges, yet families do it all the time. During a crisis of a job loss, you should be extra studious in this area. Simply being organized can save you a lot of money when it comes to your monthly bills – one late credit card payment per month could set you back $300 over the course of a year. Or worse, get your card canceled in a time when you might need it as a last resort.

Set a date twice a month to review all your accounts so you don’t miss any due dates. Schedule electronic payments or mail checks so your payment arrives several days before it is due. This way, if a delay occurs, your payment will probably still arrive on time. If you’re having trouble keeping track of all your accounts, start compiling a list. When your list is complete, you can use it to make sure you’re on top of all your accounts and to see if there are any accounts you can combine or close. (Involuntary unemployment credit card insurance may help if you’re laid off, but it may just help your credit card company, check out Insuring A Credit Card Against Job Loss.)

5. Take Stock of Your Non-Cash Assets and Maximize Their Value
Being prepared might include identifying all of your options. Do you have frequent flyer miles you can use if you need to travel? Do you have extra food in your house that you can plan meals around to lower your grocery bills? Do you have any gift cards you can put toward fun and entertainment, or that you can sell for cash? Do you have rewards from a credit card that you can convert to gift cards? All of these assets can help you lower your monthly expenses, but only if you know what you have and use it wisely. Knowing what you have can also prevent you from buying things you don’t need.

6. Pay Down Your Credit Card Debt
If you have credit card debt, the interest charges you’re paying every month probably take up a significant portion of your monthly budget. If you make it a point to pay down your credit card debt, you will reduce your monthly financial obligations and put yourself in a position to start building a nest egg, or be able to build one more quickly. Getting rid of interest payments frees you to put your money toward more important things.

7. Get a Better Credit Card Deal
If you’re currently carrying a balance, it could really help you to transfer that balance to another card with a lower rate. Paying less interest means you can pay off your total debt faster and/or gain some breathing room in your monthly budget. Just make sure that the savings from the lower interest rate are greater than the balance transfer fee. If you’re transferring your balance to a new card with a low introductory APR, aim to pay off your balance during the introductory period, before your rate goes up.

8. Look for Ways to Earn Extra Cash
Everyone has something they can do to earn extra money, whether it’s selling possessions you no longer use online or in a garage sale, babysitting, chasing credit card and bank account opening bonuses, freelancing or even getting a second job. The money you earn from these activities may seem insignificant compared to what you earn at your primary job, but even small amounts of money can add up to something meaningful over time. Besides, many of these activities have side benefits – you might end up with a less cluttered house or discover that you enjoy your side job enough to make it your career.

9. Check Your Insurance Coverage
In step three, we recommended shopping around for lower insurance rates. If you’re carrying too much insurance or if you could be getting the exact same coverage from another provider for the same price, these are obvious changes you can make to lower your monthly bills. That being said, having excellent insurance coverage can prevent one crisis from piling on top of another. It’s also worth making sure that you have the coverage you really need, and not just a bare minimum. This applies to policies you already have as well as to policies you may need to purchase. A disability insurance policy can be indispensable if you sustain a significant illness or injury that prevents you from working, and an umbrella policy can provide coverage where your other policies fall short.

10. Keep Up with Routine Maintenance
If you keep the components of your car, home and physical health in top condition, you can catch and problems while they’re small, and avoid expensive repairs and medical bills later. It’s cheaper to have a cavity filled than to get a root canal, easier to replace a couple of pieces of wood than to have your house tented for termites and better to eat healthy and exercise than end up needing expensive treatments for diabetes or heart disease. You might think that you don’t have the time or money to deal with these things on a regular basis, but they can create much larger disruptions of your time and your finances if you ignore them.

Some Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you’re out in the real world for the first time.

To help you get started, we’ll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.

Learn Self Control
If you’re lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal?

If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don’t carry more cards than you can keep track of.

Take Control of Your Own Financial Future
If you don’t learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they’re doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you’re armed with personal finance knowledge, don’t let anyone catch you off guard – whether it’s a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you.

Know Where Your Money Goes
Once you’ve gone through a few personal finance books, you’ll realize how important it is to make sure your expenses aren’t exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.

In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don’t waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it.

Start an Emergency Fund
One of personal finance’s oft-repeated mantras is “pay yourself first”. No matter how much you owe in student loans or credit card debt, and no matter how low your salary may seem, it’s wise to find some amount – any amount – of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense”, pretty soon you’ll have more than just emergency money saved up: you’ll have retirement money, vacation money and even money for a home down payment.

Don’t just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

Start Saving for Retirement Now
Just as you headed off to kindergarten with your parents’ hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you’ll have to invest to end up with the amount you need to retire and the sooner you’ll be able to call working an “option” rather than a “necessity.”

Company-sponsored retirement plans are a particularly great choice because you get to put in pretax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money.

Get a Grip on Taxes
It’s important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you’ll be left with, which is also known as net, or take-home pay.

For example, $35,000 a year in New York will leave you with around $26,430 after taxes without exemptions in 2015, or about $2,032 a month. By the same token, if you’re considering leaving one job for another in search of a salary increase, you’ll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won’t give you an extra $6,000, or $500 per month – it will only give you an extra $4,129, or $344 per month (again, the amount will vary depending on your state of residence). Also, you’ll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there.

Guard Your Health
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you’re uninsured, don’t wait another day to apply for health insurance; it’s easier than you think to wind up in a car accident or trip down the stairs.

You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you’ll thank yourself down the road when you aren’t paying exorbitant medical bills.

Guard Your Wealth
If you want to make sure that all of your hard-earned money doesn’t vanish, you’ll need to take steps to protect it. If you rent, get renter’s insurance to protect the contents of your place from events like burglary or fire. Disability insurance protects your greatest asset – the ability to earn an income – by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.

If you want help managing your money, find a fee-only financial planner to provide unbiased advice that’s in your best interest, rather than a commission-based financial advisor, who earns money when you sign up with the investments his or her company backs. You’ll also want to protect your money from taxes, which is easy to do with a retirement account, and inflation, which you can do by making sure that all of your money is earning interest through vehicles like high-interest savings accounts, money market funds, CDs, stocks, bonds and mutual funds.

Tips to Handle Audited Like a Pro

For many businesses, the end of the calendar year means the beginning of tax season. As you prepare your receipts, invoices and other financial documents from the past 12 months, you may be concerned about the possibility of a dreaded tax audit. As stressful and overwhelming as an audit may seem, there’s no need to panic. It does need to be taken seriously, but audits often deal with simple data or reporting errors that the IRS suspects may have occurred, said Frank Pohl, an attorney at Gunster law firm. He reminded business owners that not all tax audits end adversely for taxpayers. If you do receive an audit notice, here’s what to do to make the process go as smoothly as possible, and to minimize any negative impact on your business. [See Related Story: 5 Tax Deductions That Could Get You Audited] 1. Review the audit letter carefully. Open the letter promptly, and understand what information the IRS needs from you, Pohl said. If you don’t have a designated financial adviser, hire an accountant or tax attorney to help you go through the audit letter and identify the issues the IRS has flagged. Pohl also warned not to delay action or ignore the letter. “The IRS will not go away, and not acting promptly may only make the auditor suspicious or antagonistic,” he said. For security purposes, if you are being audited, you will receive a mailed letter, Pohl said. Scammers will often masquerade as the IRS by sending emails or leaving phone messages in an attempt to get your personal data, but the real IRS does not communicate with taxpayers in these ways, Pohl said. 2. Get your records organized. Before you and your tax professional respond to the IRS and/or meet with an  auditor, take the time to dig up and organize all of your business records from the past tax year, said Kimberly Foss, a certified financial planner (CFP) and author of “Wealthy by Design” (Greenleaf Book Group Press, 2013). This includes receipts and invoices for income and expenses, bank statements and canceled checks, accounting books and ledgers, hard copies of tax-prep data, and leases or titles for business property, she said. If the IRS has requested specific documents to review, be sure you have those readily accessible as well. 3. Answer the auditor’s questions (and that’s it). When you sit down with the auditor, you’ll be asked numerous questions about the information reported on your tax return. Our expert sources agreed that you should not volunteer any information you are not required to give. “Just respond with the information [that is] requested,” Pohl told Business News Daily. “Providing unneeded or unasked-for information may lead to more questions … and additional issues.” “Be straightforward in responding to questions, but don’t manufacture excuses,” Foss added. Similarly, an article on NOLO.com advises not to bring or discuss any documents from previous tax years unless asked: “Don’t give copies of other years’ tax returns to the auditor. In fact, don’t bring … any documents that do not pertain to the year under audit or were not specifically requested by the audit notice,” said the article. Keeping your tax professional involved Dealing with the IRS can be stressful, and if you’re concerned about what you might say, it’s wise to let your tax professional do the talking for you. Sandy Gohlke, a CPA, chartered global management accountant and principal at Rehmann financial services company, advised giving the IRS a signed power-of-attorney agreement that will allow the IRS to deal directly with your tax professional. That takes you out of the loop and puts them in, she said. Pohl agreed, and said that even if your tax professional doesn’t have power of attorney, you should still have him or her present when you meet with an IRS auditor. He also advised business owners not to get defensive or hostile during the interview. “The auditor … cannot and will not forgive and tax debt or mistakes, and any admissions you make can be used against you,” Pohl said. “Adopting an antagonistic attitude risks alienating the auditor, [which] will not be in your best interest.” Avoiding future audits Gohlke reminded business owners that audits are generally random, and you can’t prevent them entirely. However, some companies are selected because of certain “red flag” expenses — either amounts or types — that are out of the ordinary and would cause a second look, she said. Foss noted that bank transfers and other financial records beyond your receipts should be tracked, and anything that can’t be explained on the standard IRS form should be explained on paper. She also advised double-checking all of your math before filing. “Keep proper documentation, and only deduct ordinary and necessary business expenses that are allowed by the IRS,” Gohlke added. “Even if you are selected for an audit, you will know you have nothing to worry about.”