How to Budget for a Baby

Budgeting for a baby can seem overwhelming, but it doesn’t have to be. The key is to differentiate what is a need versus what is a want.

Determine Baby Needs

As much money as you could spend on all the cute, cuddly items at every baby store in the world a majority of those things are not necessities. Just like you need a core set of things to live – food, water, shelter, and so on – your baby has a set of core needs as well. Addressing those needs is your primary concern first. If you have a limited budget you shouldn’t be splurging on all the cuteness available without taking care of needs first.

Here are some common needs:

• Furniture:
  • Crib and mattress – a place to sleep.
  • Changing table – a place to change diapers.
• Food:
  • Breast feeding supplies (breast pump, bottles, and so on) or formula supplies.
  • Bibs.
• Diapering:
  • Diapers (disposable or cloth).
  • Wipes.
  • Diaper rash cream.
• Clothing:
  • Onesies.
  • Shirts.
  • Leggings/pants.
  • Pajamas/sleepers.
  • Socks.
  • Hats (for blocking sun in summer or keeping head warm in winter).
• Transportation:
  • Car seats that have been installed and checked by a professional (fire department, police officer, etc.).
  • Stroller.
  • Baby carrier.
• Safety:
  • Outlet covers.
  • Locks for doors with household chemicals and other risky products.
  • Baby gate for homes with stairs or to block access to certain rooms.

This covers a big chunk of what you need as a parent. From there you determine how expensive you want each item to be. Know that there are affordable options for every single item on this list. The clothing doesn’t have to be cute to be effective; plain white clothing gets spit up on just as easily as cute puppy dog clothing. Likewise you don’t need 600 of every single item. Sure, having an extra pack of onesies would be great to help reduce on constantly doing laundry, but the world won’t end if you don’t have it.

Determine Baby Wants

Once you have covered all of the absolute needs of your child, you can consider wants. There are two types of wants when shopping for your baby:

• Things that are not necessities on the list above, but you want to have them.
• Things that are necessities on the list above, but you want the better/cuter/more expensive version.

For example, under furniture you could list a rocking chair or glider as a need. Technically it isn’t a need, but I’m sure nursing mothers everywhere would disagree. Even if it were on the need list the amount of money you can spend on this simple piece of furniture is astounding.

You can go to one of the big box baby stores and spend $600, $700, or $800 on a glider. (I know because my wife and I are expecting and just went through looking for one!) I was stunned. You can get a really nice leather recliner for that much money not to mention a pretty basic piece of wood furniture with some padding.

On the other hand you can go to a big box retailer like Wal-Mart and get a similar glider for $120. Is the Wal-Mart glider not as effective as the $750 baby retailer glider? Maybe, I don’t know. It is hard to quantify. If it is, is it $600 (or more) less effective? Doubtful.

Therein lies the problem with baby shopping. You can get the basic item, but then you see everyone else running around with the better, cuter, and more expensive version. You can get a 5-pack of plain white onesies for $10 at the big box retailer. That’s $2 per onesie. Or you can go on Etsy and get something custom made for $15 or $30 per onesie. The former is a need; the latter is a want.

As long as you have covered all of the needs and are comfortable spending more money on the want side of things, feel free. But don’t confuse wants for needs. The basic items will do if they have to.

Talk to Friends with Babies

The best sources of information as to what to expect, what to buy, and how much it is all going to cost you are your friends that have had babies recently. They’ll tell you whether or not a specific item (or “better” version of an item) is worth the premium or not. They can give you estimates as to what they spent, and how much they spend each month on regular items like diapers.

Just keep in mind: Your friends may not raise children the way you want to. They may be the big spenders that wanted the best name brand of every single item. On the other hand they may have been scrimping by just trying to make it.

Nonetheless getting some firsthand experience on what they spent can help you budget for your baby. Talking to real people that have been through what you are about to experience is a lot more beneficial than the baby registry place handing you a conveniently jam-packed reminder list. (They want you to register for everything on the list to make more money, not to necessarily make your life easier.)

Err on the Side of Caution

When budgeting for anything – a home down payment, a vacation, buying your next vehicle, etc. – having more money set aside than you need is a lot better than coming up short. The same is true when budgeting for your baby.

Come up with a list of one-time purchases (like furniture) and a separate list of monthly needs (like diapers). Estimate what you think these items are going to cost you. If you want you can come up with different levels of spending: the basic item that is just fine, or the nicer version that if you have extra money you would splurge on.

The key is to cover the one time purchases either on your own, through your registry and family help, or some combination of the two. The ongoing costs are what can surprise you. Make sure you do the math on exactly how many diapers a child goes through as they age, and figure out what that is going to cost you every month.

Make sure to build in a buffer on top of your budgeted cost to account for things you didn’t think of. Adding 10% or 20% should cover you. If you end up spending less you can just save the money for the future . . . or pay for a babysitter to go on that rare date as a couple.

Are you a parent? How did you budget for your baby? Leave a comment!

The post How to Budget When Having a Baby appeared first on Money Smart Life.

Here are some tools that can help you meet your money savings goals:

1. Mint: If you want to see where your money is going, as well as set up a budget and track your progress, Mint is the free way to do so. Millions of users have used Mint to begin getting back on track.
2. LearnVest: If you want to add an investment dimension to your saving, LearnVest is a great way to do so. Learn about your habits and create a long-term plan. Bootcamps help you learn to save more effectively, and you can pay for planning services to help you create a five-year plan to put you on the right track.
3. Personal Capital: What Mint lacks in investing chops, Personal Capital makes up for. You can set savings goals quickly and easily, and use the freemium tools offered by the site to create long-term plans for your money. Personal Capital will even evaluate your retirement accounts and recommend lower-cost options, saving you money over the course of time.
4. Betterment: This is one of my favorite savings tools. Betterment requires you to make a commitment of at least $100 a month. You answer questions that help the site assess your risk tolerance and your goals, and then your money is automatically invested according to your profile each month. A great way to help you build toward your retirement savings goals.
5. SmartyPig: Earn a reasonably high yield on your money with SmartyPig, plus get a bonus boost when you use your SmartyPig card for purchases. You can also get a cash back boost when you redeem your account for certain gift cards. Set a goal, and SmartyPig will help you save for it.
6. ReadyForZero: Want to demolish debt and start saving more? ReadyForZero can help. You can create a personalized plan that will help you pay down your debt while paying as little as possible in interest. It’s a great way to get into savings mode while getting rid of debt.
7. Barcode Scanner Apps: I am very fond of barcode scanner apps for smartphones. You can snap an image of an item’s barcode, and then see comparisons to prices in town and online. It’s a great way to make sure that you are getting the lowest price. You can then save the money, putting it toward your goals.
8. Coupon Apps: Don’t forget the coupon apps. You can find mobile coupons, or scan and store hardcopy coupons to your smartphone. Organize your coupons on your phone, and then have them scanned at the register.
9. YNAB: For the zero-based budgeter, YNAB is a great tool. You can give every dollar a job – including saving up for your goals. This isn’t an automated program, so you are forced to evaluate your spending before it happens. YNAB is a good way to make sure you plan ahead, and help put your savings goals first.
10. SMART Goals: I like this app because it takes you through the process of setting goals using the S.M.A.R.T. method. You can track your progress, as well as adjust if you need to. Plus, this app can be used for more than just your money goals. Get on the right track with this helpful and informative app.

What are some other tools that can help you meet your money savings goals? Leave a comment!

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For the longest time, pencil and paper, in the form of a checkbook register and/or ledgers, was the preferred method. Now, though, it’s possible to get personal finance tracking software that can help you stay up to date with ease, including applications for your mobile devices.

Not only that, but most personal finance software applications will use your data to create visually appealing graphs that clearly illustrate your situation, and reports that detail your past spending. You can even use some personal finance tracking software to create projections of possible outcomes if you keep on with your current actions.

What is the Best Personal Finance Software?

There are many different personal finance software programs out there, and what you decide to use depends largely on your goals, your money style, and your current financial picture. There are basic budgeting apps that do little more than allow you to track your spending quickly and easily, and there are more involved programs that will even keep tabs on your investment portfolio.

Personally, I have long been a fan of Quicken. It’s what I used for years. However, when the Mac operating system stopped support Quicken 2005, I knew I was in trouble. The new Quicken has proved to be fairly powerful, and Windows users seem to like it. However, Mac users don’t have the same experience with the new Quicken. So, right now, I use Moneydance. It’s not quite as awesome as Quicken 2005, but it has a similar ledger set up, and it makes reconciling my statements each month fairly easy. Plus, I can enter information about my investment accounts and loan accounts.

If you are more into old school money management with straightforward features, Quicken is a great choice. And if you are looking for a Quicken alternative, Moneydance will do. Both of these programs allow you to link your accounts online, to make tracking that much easier.

But what about other personal finance tracking software? Here are a few suggestions for great personal finance tracking software for a variety of needs and goals:

• Mint: This is one of the most beloved budget tracking apps. Link up your accounts, and see where your money is going. Quickly see your spending, and watch for trends. Use that information to change your habits.
• YNAB: Mint is more about seeing where your money has already gone. YNAB is about actually giving your money a job. This is one of the more active personal finance tools, since it doesn’t automatically link your accounts. It requires you to think about your spending ahead of time and plan out your expenditures. This software is perfect for those who like the concept of zero-based budgeting.
• Personal Capital: If you’re ready to add investments into the mix, Personal Capital is a great personal finance tracking app. Not only do you get the budget tracking aspects, but you also get portfolio management help, and a look at your assets.
• LearnVest: This is another great software application that provides you with the ability to see all your assets. Plus, you can pay for planning services that help you create a five year plan.
• ReadyForZero: Get help paying down debt with this program. You can create a personalized debt repayment budget, and then track your progress.

No matter your goals or situation, there is a personal finance software program to fit your needs.

What’s your favorite personal finance software? Leave a comment!

The post The Best Personal Finance Tracking Software appeared first on Money Smart Life.

What Mint Offers

Mint is popular because it makes it easy to track spending, and you can put together a budget fairly easily. Because Mint connects to your accounts, it updates your situation regularly. Mint will take the information from your checking, savings, and credit card accounts, using the login information you provide, and display it for you.

Because Mint is web-based, you can access your financial information from anywhere with the Internet. You can also download an app for your mobile device, and keep the information with you while you are on the go.

On top of that, it’s possible to set up your own categories, and even set up alerts for bills and other items of importance. Mint makes use of attractive visuals to help you find trends in your spending, and keep track of how much you have spent in certain budget categories.

Mint is good for tracking your spending, and determining whether or not you are making progress with your budget. You can see your financial information in one place, and it’s updated with information right from your accounts.

Where Mint Falls Short

For the most part, Mint is a rather simple budget tracking application. You can see where you are at right now, and see what you’ve been doing with your money. However, the options when it comes to tracking your investment portfolio aren’t as robust.

If you want to keep up with your investments, you might be better served to use an application like Personal Capital. Quicken and Moneydance (I use Moneydance) also allow you to keep up with your portfolio, but you might have to manually enter items.

Additionally, there are some complaints by users that income and expense categories aren’t always accurate, and that sometimes manual corrections are needed.

Should You Use Mint?

Mint is free to use, since the site makes money by recommending savings and other financial products to you. If you sign up for what Mint recommends, the service gets a kickback.

If you want to track your spending, and you are interested in getting help making a budget, Mint might be just the ticket. It’s simple to use and visually engaging. Additionally, it takes the effort out of tracking your spending.

Personally, Mint is not my personal finance software of choice. I prefer to manually enter most of my transactions, since I find that it helps me spend more consciously. Additionally, I like the more traditional ledger look of Moneydance.

And, as I mentioned before, if you have more complex finances that include investments, Mint probably won’t meet your needs. You will need to supplement in other ways.

Think about your own financial needs, and then decide whether or not Mint is the best personal finance software for you.

Do you use Mint? Leave a comment and let others know what you think!

The post Mint Review: A Free Online Budgeting Program You Might Like appeared first on Money Smart Life.

Here are some of the problems that you can encounter if you don’t take the time to address your finances:

Overdrawing Your Account

This is a problem that comes if you don’t track your spending. Humans are bad at estimating how much they have spent, and how much they have left in their accounts. This is especially true if you use a plastic card (debit or credit) to pay. If you want to stay on top of your finances, you need to know where your money is going. Make a plan for your spending, and then track where the money goes.

You don’t have to make a draconian spending plan where you plan out where every penny goes, but you should keep track of your spending, and know where you stand in terms of your account. That way, you are less likely to overdraw your account and end up paying hefty fees.

Wrong Asset Allocation

One of the most important things you can do for your investing portfolio is to make sure that you have the right asset allocation. Over time, many portfolios tend to experience drift. If you are invested in funds, sometimes the natural turnover in the funds means that the asset allocation changes a little bit. If you have your portfolio funded by automatic investments, it’s possible that during some times you end up with more of one type of investment.

Whatever the reason, it’s a good idea to check your portfolio once to three times a year to make sure that your asset allocation is what it should be. If your asset allocation has drifted, you can rebalance your portfolio. Don’t ignore your portfolio and end up with an unsuitable asset allocation.

Money Leaks

Over time, it’s easy to let something slide, and to end up with money leaks. You might have a subscription to a magazine that you never read, or you might be paying a higher price for certain services. Perhaps you aren’t shopping around. These money leaks can add up over time. Every few months, really look at your expenditures and identify money leaks to plug.

This step includes shopping around for better prices on existing services. Double check your insurance rates. Many people don’t realize that a little shopping around could save them between $20 and $100 a month on insurance. Additionally, it doesn’t hurt to shop around for a better-priced cable package (or cut the cable and switch to Hulu and/or Netflix). Take a look at where your money is being wasted and plug those leaks.

Pay Attention to Your Finances

While you don’t need to obsess over every single dollar, you should pay attention to your finances. Look for inefficiencies in your personal economy, and then find ways to get rid of them. You should know where your money is coming from, and you should understand where it is going. Over time, many of us start to become a little bit lax with our finances. Set aside a specific time every quarter to review your finances and make sure that you are getting the best possible results for your situation.

So, are you paying enough attention to your finances? What are some other reasons you might want to?

The post Are You Paying Enough Attention to Your Finances? appeared first on Money Smart Life.

Zero-Based Budgeting with YNAB

YNAB is very easy to use, and focuses on the idea of zero-based budgeting. With this method of budgeting, you plan out your finances ahead of time, entering your income, and the assigning each dollar to a job. This includes planning out how much money you will save for retirement, spend on groceries, or pay in rent. Everything you plan to spend money on each month is figured out ahead of time, from eating out to paying down debt to building your emergency fund. You can even budget in “cash” that you can take out to be used as spontaneous “fun” money.

The idea is that you are supposed to look ahead and direct your resources. Unlike many other budget apps that will show you what you have been spending your money on after the fact, YNAB forces you to plan out your expenses ahead of time, and then helps you track your progress throughout the month.

While YNAB is easy to use, it’s important to note that this isn’t an application that will automatically enter your spending for you. You don’t connect YNAB to your bank accounts and credit card accounts. Instead, you are required to enter your spending in manually. This is a very deliberate move on the part of YNAB creators. The fact that you have to enter your spending manually holds you accountable for keeping your budget in line with your plans at the beginning of the month. YNAB, according to the web site, is based on four main principles:

1. Stop living paycheck to paycheck
2. Give every dollar a job
3. Save for a rainy day
4. Roll with the punches

It’s possible to use YNAB to look over your spending and make adjustments for the next month. And the fact that you create a budgeting system, rather than just a way to keep track of where the money has already, is highly in YNAB’s favor.

You can use YNAB free for 34 days. After that, you pay $60 to keep using it.

Who YNAB is For

Realize that YNAB is strictly a budgeting app. There is no way to track investments, and plan your overall long-term financial future. YNAB is great for the person who is looking for a way to take control of his or her finances, and who wants to plan out where his or her money is going ahead of time. YNAB is great from that perspective. However, if you want something that is a little more all-encompassing, including investments, you might want to consider something like Personal Capital or LearnVest.

Additionally, YNAB might not work very well for those with variable incomes. YNAB is best for those who are pretty sure of how much is coming in each month. Those with very regular paychecks can benefit immensely from using YNAB to begin planning their expenses, and taking control of their money each month. Even though there are a lot of things I like about YNAB, I don’t actually use it.

Zero-based budgeting hasn’t been something I have a lot of success with because I don’t make the same amount of money each month. Not only do I have a variable income, but my husband also has a variable income as an adjunct professor. Between the two of us, we never make the same amount of money each month, and planning ahead to give every dollar job doesn’t work for us. Instead, we prioritize our spending. We make sure the important items are covered, and then just spend whatever we have left until it’s gone.

For many, though, You Need a Budget is a great tool, and it can be a good way to hold yourself accountable for your spending, as well as plan for your expenses each month.

What budgeting program do you use? Have any questions about YNAB? Leave a comment!

The post You Need a Budget (YNAB) Review: A Great Application for Keeping Your Spending in Check appeared first on Money Smart Life.

What happens when you’re broke, but you have bills to pay? This is a difficult situation faced by thousands of people each day. Figuring out what to do when you’re out of money and can’t pay your bills can be very stressful and unpleasant.

Late fees start to pile up, and, in some cases, you might be in danger of losing an asset that you want (or need) to keep. When you’re in a tough situation like that, it’s important to step back, and pay attention to your options.

Paying your bills when you don’t have enough money requires that you think through the situation, and communicate with your creditors. Here are some things to keep in mind as you decide what to do when you’re out of money.

Prioritize Your Bill Payments

Your first step is to prioritize your bill payments. What’s the most important item on your list? If you need to keep the heat on, that’s a bill you should pay. If you need the car to get to work, you don’t want to jeopardize your income, so you need to pay on the loan in order to avoid having the car repossessed.

Think about which bills are likely to have the biggest impact on your situation. It’s true that late fees can pile up quickly when you miss credit card payments, but it’s also true that credit card debt is often more negotiable than mortgage debt — and you don’t usually lose your home if you default on credit card debt.

Another consideration is what you can do without. Do you really need cable TV? What about that magazine subscription? The gym membership? Expensive cell phone plan? Go through your obligations and figure out if you can cut some of them out. Dropping some of your bills can help you find money to pay the most important items.

Take an honest look at your budget, and then cut out the items that are unnecessary. Recognize which bills are truly the most important, and make sure those are paid. It might be uncomfortable, but one thing that can help is to show your prioritized list of bills to someone with an objective perspective and see if they notice anything that might need a second look.

Communicate with Your Creditors

It’s vital that you keep the lines of communication open with your creditors. If you have lost your job, or if you have suffered a financial setback of some other kind, you need to let those you owe money to know immediately.

In many cases, if you contact your creditors quickly, and show that you want to work something out, it’s possible to get the help you need.

Student loan payments can sometimes be deferred during times of hardship. In some cases, you might be able to get a mortgage modification to help you with your situation. Many credit card issuers will negotiate a new payment plan with you. Utility companies can point you to agencies and programs that help those facing financial hardship pay their bills. In some cases, if you can prove financial hardship, service providers will waive early termination fees.

Just ignoring the bills can lead to bigger problems later. If you communicate, though, there is a chance you can have your payments temporarily reduced, or have some of your payments deferred until later. You might not be able to get a mortgage modification, but if your utility payments are reduced and your student loan payments are deferred, it might free up some money to help you make a more important payment.

Save vs. Earn

You can increase the availability of money to pay bills by either cutting unnecessary expenses or earning more money — or by doing both. Your first step is to cut expenses. You should already be on this path if you have looked over your bills and determined which are the most important.

Prioritize the rest of your regular spending. Cut the least important expenses from your budget, and use the money saved to pay your obligations. Look for ways to reduce your spending, whether you are being more energy efficient at home, or whether you are brown bagging it to save money on lunch at work. Find ways to cut back, and then use the money to pay your bills.

Finding Extra Money to Pay Your Bills

If your current situation means that you don’t have enough money to pay your bills, you need to see what you can do to bring in more money to cover them. You can do odd jobs, get a another part-time job, or start a side business.

It’s also possible to start selling off some of your stuff. You can sell online, or hold a yard sale. I know its more of an extreme move but if you own your home it might make sense to sell and downsize if you don’t anticipate your income growing to cover your expenses anytime soon. Do what you can to raise more money, and try to develop more income so that you can afford to pay your bills.

In addition to earning more, you can also look for outside help to pay your bills. The local food pantry can provide you with staples that reduce your need to buy groceries. With the money you save on groceries, you can pay some of your bills. There are also community programs that can help you pay your utility bills, and help you find extra work to earn money.

If you belong to a church you can also turn to your local congregation for help. Many faith-based organizations have programs that can help you get necessities for less — or free — and that can help you pay your bills. Your family might also be able to help you by watching your children for free while you work to earn more money, or by helping you with groceries and other expenses.

Bottom Line

If you find yourself with less than enough money to pay your bills you’re not alone, many people have found find themselves in the same difficult situation. Although things may seem bleak there are options and resources available.

Prioritize your bills and your spending so that the most important obligations are met first. Look for help, including talking to your creditors about your options. Then, cut expenses and earn more money. Once you improve your situation, remember to build an emergency fund, give back, and try to follow these money rules to try and avoid the same problem in the future.

What tips or tricks have you used to pay down your bills when you found yourself without enough money to cover them all?

The post How to Pay Your Bills When You’re Broke appeared first on Money Smart Life.

One of the biggest reasons people don’t have a budget is because of time constraints. Especially when it comes to starting your budget, gathering all of the information you need and picking a budgeting program or designing your own budget spreadsheet can be time consuming.

Luckily, a budget doesn’t need to be very complicated to be effective. And if you follow these steps, you can easily manage your money in less than ten minutes a day. In fact, if you’re efficient, you may be able to budget in as little as ten minutes per week.

Start by Getting Your Finances Organized

Nearly all of the transactions that you need to make a budget are included in your checking account and credit card accounts. Actually, your credit card payments are also included in your checking account, so for a more simple budget, you can track your finances by simply keeping a running tab of your checking account.

Most people pay their bills a few times each month. When you do, simply list all of your transactions in a spreadsheet. In your spreadsheet, add a column for each transaction with the date, source (ATM, debit card, check number, or direct deposit), amount, account balance, budget category and description. Make sure that you check your online banking so that you can add any debit and direct transactions to your spreadsheet.

If you also want to show some detail about your credit card transactions, you can add this too, but you should use a separate list so that you don’t account for credit card spending twice. This part of your budgeting can usually be done in a few minutes per day or less than a half hour per week.

[Ben’s Note: This is one of the reasons why I ;put most of our expenses on our Blue Cash credit card and use online bill pay for most everything else. Being able to download and analyze all your spending in a spreadsheet or personal finance software makes it easy to see where your money is going.]

Summarize Your Spending Once a Month

Now that you’ve got a list of all of your major financial transactions, use it to create a monthly budget summary. A budget summary is really very simple. It shows your income and expenses for each category. To compute it, you already have all of the information in your checking spreadsheet.

If you are good with spreadsheets, you can easily create a pivot table that will summarize the transactions for you in just a few clicks of the mouse. For help with this step, you can use a video tutorial on how to create a budget spreadsheet.

When you are finished with this step, you will have a summarized list of each expense and income category. It is essentially a simplified budget, but it is all you really need. If you want to create a more detailed or easier to read budget, continue to the next step.

Enter the Summarized Information Into a Budget Template

The previous steps shouldn’t have taken long to execute, so you may have some time left to make your budget a little more detailed and easier to read. After all, one month’s worth of expenses typically doesn’t include things like your annual property taxes, income taxes, and insurance payments. That’s because many expenses only come up once or twice a year.

To account for these, you can enter the information you calculated in the step above to a household budget template. This will add a portion of the annual fees into each month’s budget so you can have a better picture of where you stand financially. This step could take as long as an hour or two to set up the first time, but each month after that you should be able to do it in just a few minutes.

While this method of budgeting is very simple, it is effective because you can easily customize it and keep it as simple as possible. This will save you a lot of time as compared to other budgeting techniques, and is a great way to start organizing your finances in the hopes of saving more money.

Chris Snelling has been writing articles about money related topics for over twelve years. His most recent endeavor has been creating Budget Ways, a resource devoted to budgeting and saving money.

The post How to Create a Budget in Under 10 Minutes a Day appeared first on Money Smart Life.

Even though it seems an insurmountable task, it is best to get your finances together as quickly as you can. Organize your finances now, and you can begin digging out of your debt hole sooner, or get on the right financial path for a successful future.

Importance of Organizing Your Finances

One of the biggest reasons that people overrun their incomes, and find themselves paying overdraft fees or getting into debt is that they don’t know what is happening with their finances. When you don’t know where your money comes from, and how it moves through your personal economy, you set yourself up for failure.

Without the knowledge of where your money has been — and where it is going — it becomes easy to spend more than you earn. Plus, without the proper organization and planning, you could easily spend money on things that you don’t need (and perhaps don’t even want).

When you organize your finances, you can see your fixed expenses, track your spending, and make plans for a more successful financial future. Putting off your finances can lead to a future of indebtedness and an inability to meet your money objectives for important milestones like retirement.

Take the Time to Organize Your Finances

Once you realize that your financial situation needs help, start by organizing your finances. If you haven’t done much in terms of planning your finances in the past, this might actually take some time. It’s worth it to block off two or three hours (or more) to get the basic organizational structure of your financial life in place.

In order to make things easier, set up a budget app on your computer. You can use software that is meant for your computer, or you can sign up for a free account with some sort of web application. It is possible to find a number of free and freemium money management programs that can help you keep track of your money, create budgets and even plan for the future.

Keep track of your checking account(s), of course, but you should also set up a way to track your savings, and your credit cards. You can also track your investments if you want (although you may want to set those up on another day).

Start by figuring out where you stand. Set up your software to show you where your money is right now, and then, from this point forward, begin tracking all of your spending. Even on your credit cards. Go back through bank statements and credit card statements to see what you have been spending your money on.

Look for money leaks; most of us waste money on items of little importance. Once your identify these leaks, you can try to avoid spending on those things in the future. And, of course, keeping track of your spending in your personal finance software will help you cut back on the spending that leads you to overrun your income regularly.

Bottom Line

The longer you wait to organize your finances, the worse your situation will become. The costs in fees, as well as the lost opportunity costs for saving and investing, will add up to quite a bit. Take the time now to get your finances in order, and you will be better equipped to plan for success with your money.

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1. Spending More Than You Earn
The root of most financial problems is the inability to control spending. No matter your income level, if you spend more than you earn you will be broke and in debt. Whether you have $10,000 in income or $1,000,000 in income, you must spend less than you earn.

2. Not Doing an Annual Review of Your Finances
It’s “okay” to make a money mistake for a little while if you are unaware of it. Real problems start if that mistake sustains itself for years on end. Sitting down at a specific time every year to review your finances can ward off these problems.

You might notice an extra fee on your cable bill due to a data entry error. Or you can make it a habit to comparison shop your car insurance and home internet costs in order to negotiate for the best rate. They say ignorance is bliss, but it can cost you dearly.

3. Over Paying for Convenience
It’s easy to justify spending money when it is convenient. You don’t plan out your meals and find nothing in the fridge to eat, so you go out to a restaurant and spend enough money to feed you off of groceries for a week. You need your coffee in the morning, but instead of getting up a little bit early to make it for pennies per cup you spend $5 at Starbucks. Paying for convenience is fine, but do it all the time and in excess and you will always wonder why you never got ahead financially.

4. Avoiding Tough Decisions
Sometimes life is tough. Sometimes your income goes down or disappears. Sometimes your bills go up dramatically. During those times you have a choice: you can try to finance the gap between what you make and what you spend, or you can start cutting items from the budget.

Having an argument with your spouse and whether to cut cable or not isn’t fun, so you avoid the conversation even though you could really use $100 per month to buy groceries. At the end of the day if you have the necessities of life: food, water, shelter, clothing on your back, your health, and a way to generate income to live, you’ll be okay.

5. Not Protecting Your Credit Score
A bad credit score can cost you thousands of dollars in interest. People with bad scores are seen as credit risks, there’s no doubt your credit score impacts your interest rates. It might cost you $1,000 on a car loan or $40,000 on a home mortgage to have a bad credit score. That’s a mistake when you can improve your credit score by making your payments on time and lowering your overall debt utilization.

6. Spending Impulsively
A big mistake many people make is buying impulsively. They see something they want (or think they want, thanks to clever commericals), and it is right in front of them so they buy it. A few weeks later they discover they don’t really use what they thought was so important, and have wasted money.

Before making a big purchase, sleep on it. Your emotional craving for the item should die down after a while and you may come to your senses with the realization you didn’t really need it in the first place.

7. Avoiding Preventative Maintenance
Doesn’t it make sense to spend a few dollars now in order to save hundreds of dollars later? Avoiding maintenance is one of the easiest mistakes to make because it doesn’t usually immediately impact you. You avoid some car maintenance and it saves you $300 now, but the engine blows up a year from now costing you $3,000 for it to be rebuilt.

Or maybe you live an unhealthy lifestyle and don’t exercise. It doesn’t cost you much today to sit on the couch, but when you have a heart attack or stroke earlier than you should the cost will be real. Spend the time and money necessary for preventative maintenance and avoid the major costs on the back end.

8. Thinking Everything is an Emergency
It is wise to have an emergency fund handy for when things go wrong. Having 6 to 12 months of living costs set aside really protects you from unemployment or big disasters. But even if you’ve been smart enough to build an emergency fund, you can start to think everything is an emergency. That’s a mistake that can whittle your emergency fund down below what you really need, and when the actual emergency comes along you aren’t financially prepared.

9. Letting Compound Interest Work Against You
Compound interest is a beautiful thing if you are the one with the money being lent out. If you deposit funds into a savings account, you are letting the bank borrow from you to lend to others. They pay you interest for this privilege. On the flip side if you are carrying a balance on a credit card or taking out payday loans, compound interest works against you.

10. Paying Your Bills Blind
A simple mistake to make is to simply pay your bills without looking at them in detail. Every bill you receive has a summary of the charges and then a breakdown showing what you were charged. It is easy for companies to have data entry “mistakes” that throw an extra charge in on your account. If you don’t review the bill it can easily slip past you. While setting up online billpay and automatic payments is a good thing because it helps you avoid late fees, be sure to check the actual statement to make sure you were charged the right amount.

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