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Healthy Finances: BudgetingHOME PAGE FROM HEALTHY FINANCES . INVEST IN PROPERTY Why Budget? It is advisable to operate on a household budget to achieve healthy finances in your family. A budget guides your spending pattern. It is possible to create wealth without a budget; you don’t need a budget to live within and below your means. However for most people, a budget is a useful tool. It's one thing you have to do.
Where to Start? A starting point for someone with a negative balance sheet is spending on only the necessities and not covering ALL the luxuries. The luxuries will include eating out ($40), vacations ($50), latest fashion accessories ($30), out-sourced anniversaries ($100), Christmas and birthday parties ($100) and watching recent movies in the theatre ($50). There are always alternatives of homemade parties ($30), dinners (using your own groceries), and hiring DVDs ($10). All these small savings add up to huge savings.
Deal with debt first The additional savings of more than $100 every month can be put to good use of reducing debt. The incentive that you will have these extra payments to your debt as extra surplus when you reach the “debt-free” state will push you to reduce even more on your luxuries. Remember the rule of thumb: Pay out the debt with the highest interest rate first. This is almost always a credit card debt. Then follow with the second highest rate until you finish all your debts. I’ll never emphasise this enough. Paying off your debts should always be reflected in your budget.
You must never save when you have a debt that accumulates at a higher rate than your savings. This means, one can’t justify saving at an account that gives 5% per annum return when his/ her credit card debt accumulates at 17% per annum. This just doesn’t make sense. Rather, you pay the debt with the entire amount that remains at the end of the month and fast track its payment.
Budgeting is safer Most people are never able to stick to their budget. It is most of the times the only hope you have to hold on to your home, rescue your family from hunger and cold, etc. Even when you are operating on a positive balance sheet, a clear budget will help you build your wealth in a more focused way.
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