Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Think Inc.
A forum for Hawaii's
business community to discuss
current events and issues.
Fewer than 10 percent of people claim to use a budget, and those 10 percent are probably just trying to impress the pollsters.
How to find cash ...when the couch
cushions come up empty
By Mary Kelly
In truth, most people spend money throughout the month until it runs out, and then they wait for the next paycheck. People think as soon as they get the next promotion, they'll be able to save money. But when the pay raise happens, there are more bills, more commitments, and somehow, the economic situation doesn't get better.
The average annual credit card balance, according to CardWeb.Com, is $2,500. Worse, only 40 percent of credit cards are paid off every month. With 54.8 percent of American households making less than $50,000 per year, it is important to be smart about where hard-earned money goes. Most of these strategies involve ways to find money on a tight budget, so if you already have plenty of money, feel free to skip this article.
1. KEEP US FROM TEMPTATION: Stay away from shopping malls, garage sales, and swap meets. And drive by the strip malls and stores instead of stopping. Especially shy away from those home parties thrown with the intent of selling you products. If you don't put yourself in the situation where you are able to spend money, you won't.
DAVID SWANN / DSWANN@STARBULLETIN.COM
2. JUST SAY NO TO SOLICITATIONS: We all love to support the soccer team, the band and the school field trip, but if you don't really need the Portuguese sausage, the cookies or the chili, be strong. Think of your own family's welfare. Smile nicely and say thanks, but no thanks.
3. AVOID MAKING ANY PURCHASES FROM A TELEVISION ADVERTISEMENT, SHOPPING CHANNEL OR THROUGH THE INTERNET: It is easy to spend money carelessly. Infomercials and television salespeople are good at their jobs, which is to create a desire for their product. You don't really need whatever it is. Very few absolute necessities are sold for $19.95 plus shipping and handling.
4. TRACK CREDIT CARD DEBT: An easy way to figure debt owed is to use your checkbook register as a monthly tally. After making a payment with a check, deduct that amount from the overall balance. Record the balance remaining in the checkbook. For example, if you write a check for $30 to pay your Sears bill, still owing $650, next to under Sears in your checkbook register write balance remaining: $650. I also recommend including the Annual Percentage Rate, the interest rate being charged next to the balance remaining. The checkbook would include "Balance Remaining $650 at 18 percent" next to the Sears entry. This way, at the end of the month, you can easily add up all debt and how much it costs. You also know which credit card has the highest interest rate so you know at a glance which card should be paid off faster.
5. RECOGNIZE BUYING BEHAVIOR: Many people shop when they are bored, hungry, tired or upset. This makes them susceptible to unnecessary impulse buys.
6. DIFFERENTIATE BETWEEN WANTS AND NEEDS: If you really need an item, make the purchase. Don't buy something you don't truly need when living on a tight budget. If you think you must have it, promise yourself to wait a week. You'll be amazed at what you forget to buy because it isn't that important. Yes, new lawn chairs would be nice, but you can wait until next year.
7. INCORPORATE THE FAMILY: Children need to understand they do not get everything they want. Many parents would rather give in than say no to their children in public. If children are part of the budget decisions, they understand why they don't get every new toy or DVD they see.
8. ONE MONTH ONLY: People often spend without knowing where it goes. Budgets are largely ineffective because people don't know how much they are spending now. Try this for one month to determine where money goes. Here are the rules: Every member of the family participates fully and honestly. Every evening, everyone records what and where they spent money that day, down to the penny, by category. Suggested categories include groceries, clothing, laundry, rent or mortgage, electricity, telephone, cellular phone, home maintenance, household expenses, vehicle expenses, gas, car insurance, home insurance, loans, education, entertainment, lunches out, personal care, gifts, pets, savings, investments, child care, charity contributions, taxes, medical expenses, dental care, and miscellaneous. After one month, the family has a good idea of where money goes. The other big advantage to "one month only" is people tend to be far more judicious if they know they have to confess their spending each evening. Do you really want your spouse to know you ordered the supersized fries?
9. CASH OR CREDIT?: Another good way to continue to track expenditures is to use the all cash or all credit method. The credit method is to charge every expense on one single credit card, so when the statement arrives, you can see where the money went. This works best if you pay off that card in full every month, otherwise, you are just creating more debt.
The cash method is to pay cash for everything, and religiously write down where it goes. Spend 60 cents on a soda? Write it down. For some, carrying limited amounts of cash while keeping their credit cards in a plastic glass filled with water in their freezer is enough to curb spending impulses. For others, cash in the wallet magically disappears. For them, the credit card method is advisable.
10. GET AN ALLOWANCE: In any beginning budget, the miscellaneous field winds up being larger than most families realize. Events pop up, and they cost money. If every member of the family agrees to adhere to their particular allowance, parents are not bombarded by repeated requests, and children get the chance to be smart early about money. Those events must come out of the allowance or it doesn't happen. Allowances works for adults too, since it requires them to pay attention to those miscellaneous $10 here and there, which adds up to hundreds or thousands every year.
Being smart about money doesn't mean depriving yourself or your family of what you really want. It's about knowing where the money goes, and making the most of what you have.
To participate in the Think Inc. discussion, e-mail your comments to business@starbulletin.com; fax them to 529-4750; or mail them to Think Inc., Honolulu Star-Bulletin, 7 Waterfront Plaza, Suite 210, 500 Ala Moana, Honolulu, Hawaii 96813. Anonymous submissions will be discarded.
