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Hi,
I think that article is really correct. I think that having my car
break down on me (the morning of new years eve).. and realizing that
already for towing and diagonistics I am past $130 dollars.. It is
very important to have a budget that includes a category for
emergencies. The only big question I would have.. is what percentage
of a paycheck should go into that category?
~Trisha
— In Budget101_@yahoogroups.com, “Liss”
>
> Why live on a budget?
> By Shelly K. Schwartz
>
> 4 reasons to budget
> 1. Help control debt
> 2. Earn cheaper rates
> 3. Improve relationships
> 4. Save more money
>
> If you’re like most Americans, your monthly income never goes far
> enough. After shelling out for house payments and groceries, it
seems
> there’s little leftover for things that matter most to you —
weekly
> dinners out, orchestra-row theater seats, a college savings plan
for
> your kids.
>
>
>
> Hate to break it to you, but it’s not your salary that’s to blame.
> According to financial experts, it’s a pattern of poor spending
> choices.
>
> “When my clients sit down and really look at where their money is
> going, oftentimes they are shocked to find it has nothing to do
with
> what’s really important to them,” says Martin Siesta, a certified
> financial planner for Compass Wealth Management in Maplewood,
> N.J. “Five dollars a day on Starbucks, for example, is a big number
> when you multiply it by 360. That takes away from things you may
have
> been struggling to attain.”
>
> Life’s little extras are well within reach for those who know how
to
> budget.
>
> By establishing reasonable spending limits and sticking to them,
the
> average consumer can do far more with less — without sacrificing
> daily conveniences, said Jim Tehan, a spokesman for the Myvesta
> Foundation, a self-help consumer education Web site.
>
> “Budgeting is all about controlling your finances instead of
letting
> your finances control you,” Tehan says. “That element of control is
> going to save you money in the long run.”
>
> Controlling debt
> Financial mismanagement makes consumers more vulnerable to
> overspending, which results in lower savings and higher credit card
> debt.
>
> Myvesta’s 2005 annual Credit Card Survey, reports the average
> American carries $2,328 in credit card debt, spread out across 2.9
> cards. With interest rates at or above 18 percent for most cards,
> that gets expensive. For example, a $5,000 balance on a credit card
> with 18 percent interest would cost you more than $8,000 to pay off
> if you made only the minimum payments (4 percent).
>
> “The amount of money you wind up spending just servicing debt
through
> credit card interest could be extra money you could apply towards
> something else,” Siesta says, adding that following a monthly
budget
> can help you both pay down existing debt and prevent impulse
spending
> to begin with.
>
> Cheaper rates
> Another upside to life on a budget is that it forces you to become
> organized. That, in turn, helps you avoid late payment penalties
and
> improves your credit score. Lenders use your credit score to
> determine how much they should charge you for auto and mortgage
> loans. It also can affect how much you pay for auto and homeowners
> insurance.
>
> Improve your relationship
> A less obvious benefit of budgeting is the positive effect it can
> have on relationships. According to Siesta, sitting down with your
> significant other to discuss financial goals helps prevent money
> disputes down the road. It also provides a rare opportunity to
define
> your own spending philosophies. “Money is a huge source of stress
for
> many couples,” he said. “The mere act of discussing your finances
> with a spouse or significant other really does help create better
> understanding and better relationships.”
>
> Saving for the future
> Finally, learning to live within your means can help you get ahead.
> By allocating a portion of your monthly budget towards savings, you
> can simultaneously build a retirement nest egg for your future and
a
> financial safety net for short-term emergencies, in case you or
your
> spouse lose a job or suddenly fall ill.
>
> “Budgets create financial security, which gives you the ability to
> withstand the financial surprises that life throws your way,” Tehan
> said.
>
> Budgets are all about financial freedom. Without a plan for saving
> and spending, you’ll never make the most of your income — no
matter
> how much money you earn.
>
> “Budgets are very empowering,” Siesta says.
>
> “They don’t lead you away from something. They lead you toward your
> financial goals.”
> By Shelly K. Schwartz
>
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