Many people are struggling to make ends meet in today’s society. In most cases, it does take two incomes to make it work. With the rising cost of living many people have depleted savings or have not been able to start a savings plan. The United States is considered one of the richest countries in the world, but we have one of the lowest savings rates.
A lot of elderly people are depending on social security to provide enough income to live on, but it was not designed for that. Social Security is supposed to be a supplement to a retirement or savings to help the elderly pay for the necessities of life. With the baby boomers starting to reach retirement age, our Social Security system will be in jeopardy. Many people believe that the money that is taken out of their pay and designated for Social Security is going into an account for their retirement. That is not the case. The Social Security payments that we are making today is being paid to recipients today. It is up to the individual to begin a savings plan or retirement account on their own.
Setting up a budget is one of the best ways to overcome the problem of debt and beginning a savings plan. Many people are at a loss as to how to start a budget that works for them. Budgets that do not include any extras are hard to continue. People get discouraged and give up. One of the most important things to remember when setting up a budget is to pay yourself first. Begin with putting ten percent of your pay into a savings account on the day you are paid or as soon as you can. Look for a savings accounts that pays the highest interest rate.
When setting up a budget, you must first take into account your income for the month minus the ten percent used for savings. You must then figure your spending pattern, this should include all utilities, credit cards, insurances, taxes, along with an estimate of groceries, medical, automotive expenses, clothing, and personal necessities. The best way to see a spending pattern is to get a receipt for every dime you spend. It may take a month or two to get a spending pattern, but you will need this to set up a reasonable budget that will be easy to live with. Do not totally cut out money used for entertainment, such as dining out, theaters, family outings. One important thing to do is cut up all but one credit card. Keep the one that charges you the less interest. Keep this one credit card only for emergency situations and try your best not to use it.
Make separate list for bills and income. You must then decide in what order to pay the bills you have. The most important are the things you must have to survive, shelter, food, and utilities and transportation. Look over your spending pattern to see what you can give up or how to reduce the cost of the things you do need. Think about raising deductibles with insurances, clipping coupons for only the items that you use, packing your lunch or carpooling.
The easiest way to set up your budget is with the envelope method. Make an envelope for each of your bills. Each week, put one quarter of the amount required into each envelope. With credit cards, only put in what the minimum payment is at first. In four weeks time, you will have the money to pay each bill. It will take a little time to get caught up if you are behind, but you will not get further behind if you use this method. If you find that there is not enough money to pay the bills you have each month, you must further reduce your spending or find an additional source of income. It may be that you will have to sacrifice items in order to stick to your budget. Remember, if you call the collectors and let them know what you are doing, many will work with you.
Once you are caught up and bills are getting paid when they are due, look to see how much money there is at the end of the month. Take any extra money and use it to pay on the bill with the smallest balance due that charges interest such as a credit card. Once that particular bill is paid completely, use the money from that bill to pay off another, then another. Soon you will have bills paid off, and you will have extra money for savings. If you are paying on a mortgage, send an extra hundred dollars a month and have it applied to the principle of the loan. You will end up saving a lot on your mortgage and you home will be paid off sooner.
Do not change your spending pattern once your bills are paid, you still need to fund your savings. You must try to save as much as you can, and then think about opening an IRA or contributing money to your 401K plan if your employer offers one. Set a goal and do your best to achieve it.
Funding your retirement is one of the goals that must be worked on long before you retire. Sticking to a budget and increasing your savings is the easiest way to achieve this lifelong goal.