The Importance Of An Emergency Fund

Sometimes life throws you a curve ball. You lose your job, your car transmission goes (this happened to me for a total cost of $3200) your washing machine dies. These events happen all the time.

An emergency fund protects you against these things by allowing you to dip into your savings to pay for them instead of going deeper into credit card debt.

The experts disagree on how much you should stash away. They say anywhere from 2 to 8 months of living expenses should do the trick.

For example if you have a freelance job that pays you different amounts each month you probably want to have 6 to 8 months of living expenses saved. If you feel your job is secure then you may only have to put away 2 to 3 months of expenses.

According to Dave Ramsey, you should start with $1,000 in your savings. On top of that I feel you should have $1,000 as your average checking account balance. This may help you from living paycheck to paycheck.

You may find it difficult or easy to build up your emergency fund, but you will sleep better at night with the savings in place in case something goes wrong.

How You Can Save $300 Or More A Month

Here are several ways to squeeze extra money out of your spending plan each month:

Credit Cards Are Risky

Some reports say that we spend an extra 18% when using credit cards as opposed to cash. It's like invisible money. It's just so easy to use that plastic instead of our hard earned pennies.

Let's say you use your credit cards for groceries, dining out, or clothing. If you spend $200 to $500 a month, you're really spending an extra $35 to $90. If you have finance charges of another $50 dollars, that would (on the conservative side) bring you an extra $100 saved by cutting back on your credit card use.

Bank Fees

If you keep your checking account near zero, and use a debit card that takes money out of your checking, you could be paying a lot of money in bank charges. $20 here, $45 there. You could save $50 a month avoiding bank fees.

Your Bad Habits

Sure we all have them, and I'm not suggesting you live like a saint, however, if you cut back on your bad habits it could save you some money. Maybe you smoke, or eat out often. Maybe you buy lunch everyday, or a coffee, or soda. You could save an easy $100 a month cutting down on these habits.

Don't Spend Your Tax Refund

The average tax refund is $2400 a year. What if you only get back $1200? If you don't spend it, that's another $100 a month in savings.

Total Savings A Month

Credit Cards - $100
Bank Fees - $50
Bad Habits - $100
Tax Refund - $100

Total savings...$350. That's a lot of pennies folks.

The Greatest Value

The greatest value in life is not what you get. The greatest value in life is what you become.

Jim Rohn

Motivational Speaker

A New Hope

Hope is defined in Webster's Dictionary as:

1. To cherish a desire with anticipation

2. To expect with confidence

Maybe you have made some mistakes with your money. Maybe you're deep in debt, or you just don't have enough money to make it through the month.

If you have reviewed your spending plan and are disappointed at the results, now is the time to take a step back and take a look at the whole picture.

Just because you're not in the position you want to be with your money doesn't mean you won't be someday.

As Webster's points out, hope is expecting with confidence that a desire will come true. This blog has been created to give you the tools to move ahead in your quest for financial freedom.

To become wealthy, you first have to see what you're doing wrong, and then follow a plan to head in a different direction.

You've got to believe you can do it.

It takes as much effort to aim low in life as it does to aim high. Why not make the decision now that you are going to create goals and strive to reach them?

I know the stock market and the economy are down, but they will rebound. Things will get better, but you have to make some changes first. If your money plan is not working, (or if you don't have a plan) make the choice to create a new one.

Perhaps you can earn more, or cut your expenses. Or maybe you can do a little of both. In future posts I'll write about methods to free up cash, and how to set goals...and reach them.

How many times has something gone wrong in your life only to turn out okay?It's the same with your money.

Expect with confidence.

Create A Spending Plan In Seven Easy Steps

It's time to tell your money where to go. A spending plan is the method we will use.

You've probably heard of spending plans or the B word (budget) but I prefer to use the term spending plan. They basically work the same way. But...

the word budget sounds so cold, so restricting, soooo boring.

What is a spending plan?

A spending plan is simply a way to keep track of your money month to month. It allows you to record your spending, and hopefully your saving habits.

The Seven Steps

1. Track your expenses and savings or retirement accounts for one month, (see my post Keeping Track Of Your Cash)
2. Use any of the following to track your information; a pad and paper, an Excel spreadsheet, Quicken or Microsoft Money.
3. Create a category for every item or event you spend money on each month.
4. Take your estimated income for the month and break it down into each category. For example $250 may go to your car payment, and $1500 for rent.
5. Some items will be fixed, such as your rent or mortgage. Others will be flexible such as the minimum balance on your credit cards, or the cash you put into your savings. (If you don't have enough cash left to put into savings don't worry for now, we'll get to that in a later post.
6. Don't forget to list any expenses that are not occurring every month but come up throughout the year. For example, spending on birthday gifts can occur during any certain month of the year, so add that spending to your plan for the month they fall on.
7. Create a plan every month.

Conclusion

A monthly spending plan plays an important part in getting you on track financially. Once you get the hang of it, it should only take you about fifteen minutes a month to complete it. Of course you can spend more time crunching the numbers if you're anything like me and enjoy that sort of fun.

Napoleon Hill Quote And Link

Whatever the mind can conceive and believe, it can achieve.
Napoleon Hill

Here is a YouTube video of Napoleon Hill. He wrote Think And Grow Rich after studying over 500 wealthy men.

Keeping Track Of Your Cash

We get in trouble when we don't keep track of our spending. Does your money disappear as soon as you get it? Are your dollars spent before your get your paycheck?

If you answered yes...take a deep breath. You're not alone.



In Jean Chatzky's book The Difference her research tells us that 54% of Americans live paycheck to paycheck.

And 15% get further in debt each month.

It's time for you to get control of your spending. Here are three options to start:

1. Use a pen and paper (sounds simple, but it works)
2. Use an Excel spreadsheet
3. Use a money program such as Quicken or Microsoft Money

What To Do

Two quick notes: Save all receipts, and don't count ATM withdrawals as one expense. Cash from the ATM should be recorded separately depending on what items you spend it on.

For one month (to start) do the following:

Set up categories you spend your money on such as; rent/mortgage, electric bill, car payments, credit card 1, credit card 2, and so on...

Keep a piece of paper or pad with you during the day and keep track of every penny you spend.

At the end of the month, add up your expenses by category, and then total your spending for the month.

Subtract your expenses from your take-home pay(after taxes)

One of three things will happen:

• You will break even(not bad)
• You will have more income than expenses(very good)
• You will have more expenses than income(ooops)

A Closer Look At Your Expenses and Income

If you really want a clear picture of your financial situation before you subtract your expenses from you income please read the following:

You have expenses that come up throughout the year that you don't pay for every month. For example, Christmas or birthday gifts come around during the year. Think of any expenses you pay that aren't monthly and estimate the total amount you spend. Then divide that number by 12 months and you will have your estimated yearly expenses. Add that number to your monthly expense number you calculated earlier and that will give you a more accurate idea of where you stand with your outgoing cash.

For example...

Lets say you spend $4,000 the month you track your expenses, and you calculate your yearly costs are $3,000 dollars(divided by 12 months = $250 per month.) Your estimated monthly expenses would then be $4,250.

To get a better idea of your net yearly income, take your take home pay for one week and multiply it by 52 weeks. Then divide by 12 months. This will give you a more accurate monthly income amount because some months have 5 weeks and others have 4.

Conclusion

In one month you will have a clearer picture of where your money goes, and how much you take home. It may not be a pretty sight, but at least you will know where you stand. Read on for future posts to help you get on the right track.

Are You Ready To Turn Your Pennies Into Wealth?

If you answered the questions in one of my previous posts regarding where you stand with your money, then you know where you are financially. If you're happy with where you're at, you can still enjoy this blog and hopefully learn some new tips.

If you're not happy with your financial footing...it's time to make a change.

Would you like to:

Stop living paycheck to paycheck?
Have some more money in your checking account?
Take a vacation now and again?
Fund your retirement so you don't have to work until you're 90?(unless you want to of course)
Drive a car that doesn't need tape to hold it together?

If you would like to do any of the above, it's time to act. You have the ability to change your future.

As you will soon read, the first part of your plan may be the most difficult. Hang in there. It will get easier as you build your confidence...and your cash.

Please remember this. We all make mistakes with our money. I'm learning about how to handle money just as you are. We have a journey ahead of us, but instead of viewing it as difficult, lets view it as a challenge.

Make a list of your own financial goals. What do you really want? You need to develop a strong desire for what you want in order to eventually get it.

A Bit Of Hope...

When riches begin to come, they come so quickly, in such great abundance, that one wonders where they have been hiding during all those lean years.

Napoleon Hill / Think and Grow Rich

7 Questions To Ask About Where You Stand With Money

Many of us are living on the edge with our money, and not in a good way. We live paycheck to paycheck. If we were to lose our income we would have no financial cushion to fall back on.

The first thing we need to do is take a look at where we are, before we can go forward.

Here are 7 questions to ask yourself:

• Are you living paycheck to paycheck?
• Do you have an emergency fund set up?
• Do you set aside money each month for retirement?
• Are you getting further into debt each month?
• How much money do you have in your checking account?
• Do you have a plan to make your financial situation better?
• Are you ready to make a change?

Take some time to go over your answers to these questions. Your responses may make you feel unpleasant, but by looking at where you are, you can decide where you want to be.

The Five Laws Of Gold

Written here (in my own words) are the Five Laws Of Gold from George S. Clason's classic -The Richest Man In Babylon:

1. Money will be attracted, and come in greater amounts, to the person who places no less than 10% of their income toward the future.


2. Your dollars will be hard workers if you find wise places of employment for them.


3. If you are careful and seek council on where to put your money to work, it will stick close to your side.


4. You will lose your money if you invest in a venture you don't understand or is not run by those skilled in the project.


5. You will lose money if you look for unreasonable earnings and seek others that have wild dreams and inexperience handling your money.

I think this is good information to start the blog off on the right foot. Consider these laws, and ask yourself if you are following any or all of them. You may be surprised at your answers.

What This Money Blog Is About

This blog is for anyone who wants to turn their pennies into wealth!

I myself am interested in the process of growing wealth, and my goal is to teach you about personal finance, and in turn trust that your comments will help me to write a better blog.

I have read many personal finance books, talked to those who have money, and have tried out the methods I have learned with some success and some failure. I will turn to those methods in my writing as well as create original posts to hopefully set you on your course to get rich.

This is not a get-rich-quick money blog. You will need to put in the effort. Together, my hope is that we can all turn our pennies into wealth.

Enjoy