There comes a time in every family’s life when you have to reevaluate your finances and tighten your belt. Loss of employment, salary changes due to maternity/paternity leave, debt and overspending can all be reasons.
If you have some savings tucked away, it may cushion such a financial strain. However, if not it may be time to take a closer look at your family finances.
Prioritize Spending – When money is tight, it’s essential to prioritize and determine what spending is essential and what’s not. For example, groceries for the family is essential, dining out is not. Paying the rent or mortgage is a must, but planning a vacation can wait until next year. Similarly, paying down debt is more important than a family night out at the movies. Ask yourself the golden question: "Do you really need it?" Once you have prioritized your spending, paying for the basics will become easier!
Make a Budget – Make a budget of all your monthly expenses, including recurring bills and debt. Be sure to allocate funds for essentials like groceries and rent/mortgage, but if you have debt, try to pay down more than the minimum monthly payment if possible. Give yourself a monthly cash allowance to use for essentials to ensure you don’t spend beyond your means. If you have extra cash left over, create an emergency fund for yourself.
Consolidate Debt – If you have a number of outstanding bills from different credit cards companies, you may wish to consolidate all into one card with a lower annual interest rate. Not only will having one monthly bill to pay be easier and less stressful, having a lower interest rate definitely can save you lots of money!
Cash or Credit? – If you are able to leave your credit card at home, pay cash only for new purchases. This ensures you don’t overspend and add to existing debt or financial strain. It will also take the stress away from receiving a growing monthly credit card bill!
Look for Added Cost-Savings! – Sometimes savings can appear in places you never thought to look. Consolidate you home, life and auto insurance to save hundreds of dollars annually. Or refinance your mortgage to the current 3.19% 5-year fixed/closed interest rate, and save literally thousands of dollars (ING Direct posted rate as of August 23rd, 2012)!
The good news about finances is that they’re only temporary, and can be turned around with a little bit of persistence. If you keep a positive outlook during a rough financial time, it really pays off!
This article was written by me, Jenna Em, and appears in the Wednesday August 29th, 2012 issue of the Kuklamoo blog.