Staying on Your Family Budget
This is a guest post by Al Jacobs who is a writer for OnTheMoneyTrail.com. He will be featured here about once a month and has a wide breadth of experience. We are happy to work with him and highly recommend that you check him out!
Staying on Your Family Budget
By Al Jacobs
www.OnTheMoneyTrail.com
If you visit google.com, the Internet’s most prominent search engine, and
enter the words “Family Budget,” you’ll be referred to 93,800,000
websites. As you see, there’s a plethora of information on budgets. Visit
some of the sites as I did and you can learn how to create them, revise them,
refine them, interpret them, rationalize them, and conform to them.
Nonetheless, the number of American families whose finances are out of control
is staggering.
The difficulty is not a shortage of budget advice. On the contrary, there is
more available guidance on the subject than most people can begin to digest.
And therein lies the problem, for the sheer volume of recommendations is like
dining in a restaurant with 150 entrées on the menu: You cannot do justice the
options.
With that said, I’d like to offer six guidelines that, if followed, will
enable anyone to live within a budget. Short of personal catastrophe, simply
conform to these rules and financial problems will tend to evaporate.
1. Your credit card balances are paid in full before the end of each billing
period. Using these pieces of plastic is not a problem, but a payment schedule
that requires payment of interest is the road to ruin. The issuing companies
hope that each cardholder will remit the minimum monthly servicing amount,
resulting in ever-increasing unpaid balances. They regularly increase card
limits to encourage abuse, meaning ever more interest and penalties. If you
plan to live within your budget, you’ll need to disappoint them. Admittedly,
the temptations can be insidious. If for any reason you cannot follow this
rule, then cut up the cards with a scissors and fashion your life accordingly.
2. You purchase no personal or household items on time. A couple I’ve known
for many years are among my closest friends. During the first few years I knew
them, their living room remained completely vacant. The explanation seemed
simple. They lacked the money to furnish it as they wanted, refused to go into
hock for something they considered nonessential, so waited until they could
afford to do justice to the room. Today they are wealthy, with every luxury
including a beautifully furnished home. It’s my belief that they went about
things in exactly the correct manner. The principle is basic: Acquisition of
items that are not vital implements of living is deferred until the spare cash
is available. The key is distinguishing between what is really important and
what is not.
3. You avoid vacations that you cannot pay for with cash on hand. A month’s
excursion through the Melanesian Islands of the South Pacific will be an event
you’ll remember for a lifetime. If you can’t actually afford it, its cost
may also be something you’ll recollect for a lifetime. Vacations are meant
to be enjoyed, and returning home with a billfold intact is an important part
of that enjoyment. As an alternative, a weekend in the Adirondacks or Pismo
Beach may prove to be a far more rewarding experience. Before you make any
reservations, tally your cash on hand. Your budget will appreciate the
consideration.
4. You do not gamble. Every time an Indian casino opens its doors, it seems
to enjoy instantaneous success. You might think there’s a limit on how many
dollars are available for disposal into this bottomless pit, but perhaps there
is none. In any event, you will not be a participant in any of this nonsense.
You may feel free to visit the racetracks and gambling parlors, perhaps taking
advantage of any economy-priced buffets they offer, but you don’t give these
sharks any of your money. As a final thought, add state-sponsored lotteries to
your list of no-nos.
Your vehicle is owned without borrowing of any sort. With the exception of
hearth and home, the motor vehicle constitutes the typical American’s single
most important fixation. No other product is more forcefully marketed, and far
too many people succumb to its allure, forfeiting a substantial portion of
disposable income. I’ll put it bluntly: No one should drive a vehicle that
is financed or leased. Acquire your transportation 100% cash on the
barrelhead, even if it means you drive a 1984 Toyota Corolla. At a later date,
when your fortune is deservedly secure, you may feel free to sport a brand new
Rolls Royce—but again, devoid of any financing.
You do not purchase things you don’t really want. Marketing as we know it
developed during the decade following the First World War, known as the Roaring
Twenties. Since then marketers have perfected their ability to foist off
unneeded junk on a gullible public. The debut on June 29, 2007, of Apple’s
IPhone is a splendid example of how a market is created. As a device that
incorporates a camera phone and multimedia player together with e-mail, text
messaging, web browsing, and voice mail, it contains all the elements to which
hyperbole can be exploited.
How else can you explain why thousands of prospective customers lined up
outside stores for several days, to be among the first to purchase this
somewhat versatile toy at a price up to $599? Before you buy something, give
serious thought as to whether you really need it or want it. Don’t let sales
pressures dictate your decisions.
About the author: AL JACOBS has been a professional investor for more than four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. In addition to managing his investments on a day-to-day basis, he is a featured financial columnist for both online and print publications. He is the author of Nobody’s Fool: A Skeptic’s Guide to Prosperity. You may subscribe to his financial Newsletter, “On the Money Trail,” at no cost or obligation, by visiting www.onthemoneytrail.com.
Related articles you might be interested in:
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader or email.
These are some great ideas. In our blog today, we talked about how it’s hard to get advice from other people on budgets because their spending might be different than yours. However, your pointers are nice and broad that people can use to give themselves an idea of where to start, and starting is the hardest part. We’d love to hear your comments on our blog!
-Mallory
Is your family connected?
http://www.wherefamiliesconnect.com