"Let's go back, back to the beginning"

I suppose one of the first things I should have written about when I started this site is how to set up your own budget since this is a website about personal finance and budgeting, after all. If you're already reading this, I assume you know how important it is to secure your financial future (if not, read my previous posts!), and first step in doing that is to do the following four things:

• Budget: The backbone of personal finance is a budget. I know, the word sounds intimidating, as well as boring and uptight, right? Well it doesn't have to be! Most people, even if they don't keep a budget on a paper, keep a daily budget in their mind. Ever thought twice before buying that book, because you know if you spend the money you won't be able to buy that sweater? Then you're already budgeting. It's important, though, to start listing out your specific budget to gain a bird's eye view on your money, what you spend it on, how often, whether you're over-spending in areas you could cut back on, etc. Need help on how to get started creating a budget? Click here, print out and start budgeting!


• Rein in your costs: After you've filled out your fancy little budget, now you should have a clearer picture of where you can start cutting your expenses. Do you really need that $4 Starbucks latte every morning? Do you buy your hair products directly from a salon, or do you save money by buying them at Target? These are the kinds of questions you'll be asking yourself as you start mapping out where you can shave off dollars here and there. Every dollar ends up counting in the long run.


• Dig yourself out of debt: Maybe you shouldn't have taken out that loan to go to Europe...or charged the entire trip on a credit card after your loan was denied. Maybe your college loan has got the best of you and is taking eons to pay off. Or maybe you wished you had waited till you bought that new car right after graduation. Whatever the case, you can't make money or save while you are in debt. Why? Because when you borrow money, you are being charged a fee to be able to use it. This fee is called "interest" and it's what you have to pay on top of the money you borrow. Using credit isn't a bad thing; we all need a good credit history to make the bigger purchases in our lives, such as buying a house. But if the monthly payments on your credit card or loan begin accumulating and it's getting harder for you to make the payments, then it's time to get your financial life in order. Wanna know the secret to digging yourself out of debt? Pay more than the monthly minimum every month. You aren't really "saving" if you're losing money by taking longer to pay off borrowed money. Why take 5 to 10 years to pay off a credit card with the minimum amount every month (the minimum will cost you thousands of dollars in interest over that period), when you could pay it off as fast as possible and save for bigger, better things?


• Save for Retirement: I've said it before and I'll say it again -- the majority of us will need a nest egg to fall back on once we retire, retire early, or if something bad happens and you aren't able to work anymore (the last case is also a good reason to begin investing in a company insurance policy!) . The "or's" are endless. Don't get lazy with saving and think that someone else, such as a family member or spouse, will save for you and dig you out if and when you're in too deep. Take advantage of the fabulous tax benefits of investing in IRAs and 401(k)s -- doing so is essentially taking out an insurance plan on your financial life!