By Joanne Guidoccio, eHow
To become financially fit, learn how to live within your means and create a realistic budget that allows you to save, invest and enjoy your money. —Lois Vitt
Create a Budget
A budget can help you pay your bills on time, cover emergencies and reach financial goals. Start by paying attention to where your money is going. For one month, carry a small notebook and keep track of all expenditures and money withdrawals. This includes every check you write and every card you swipe. At the end of the month, go through each item in your notebook. Highlight the essentials–mortgage, rent, utilities, car loan, insurance–and take a close look at the remaining items. Try to identify your “latte factor” –those expendable items you buy on a regular basis that add very little to the quality of your life. It could be a latte, cappuccino, DVD, chocolate bar or shoes. Calculate the annual cost of the latte factor. For example, if you buy a $4 coffee each day of the work week, the annual cost will be over $1000. Decide which expendable items can be removed and create a simple spending plan that will allow you to save money and still enjoy your life. Consider using money management software to make the budgeting process an easier one.
Start Saving Money
You will be more likely to save money if you make it a priority. Set a goal–car, house, college, dream vacation, retirement–and calculate the cost. Create a reasonable time line and decide how much money you will save per week or month. At the beginning of each week or month, pay yourself first. You can ask your bank to make this easier for you by automatically transferring funds from your checking account to your savings, money market or mutual fund account. If the money from the latte factor does not cover this amount, change a few more spending habits. Use cash and ask for discounts on large-ticket items and services. Raise your deductibles and lower your insurance bills. When buying consumables, such as food toiletries and cleaning supplies, consider generic brands. Get creative and substitute imagination for money.
Get a Financial Education
Increase your knowledge of current financial issues. Read the business section of your daily newspaper, take evening courses at your local high school or college and attend seminars sponsored by banks and other financial institutions. Most important of all, ask questions and check the details of all purchases. Start reading the small print on those contracts and agreements. When selecting a bank, pay close attention to the services and additional fees. They are generally small–from a few cents to several dollars–but can add up quickly. Get to know your banker and meet with him at least once a year to review your accounts. If you decide to hire a financial adviser, ask friends or colleagues for recommendations.
Read also: Steps to Financial Security