5 Important Reasons Why You Need a Budget

Aside from putting you in control of your money, there are 5 other important reasons why you need a budget. These include:

1. Creates a Savings Plan. A budget when done correctly, tells you how much money you can afford to save each month. It is important to take the time to learn how to budget, because you will be creating a solid foundation upon which you can build wealth.

2. Creates a spending plan.You are able to deduce from your income, how much money you have available to spend. Your budget is your guiding compass for how you should spend your money. Without which, you easily get lost financially.

3. Keeps track of how money is spent. Monitoring your budget and reviewing your spending regularly ensures that you are being mindful about the way your money is spent. If you determine that you are spending more money than you would like to, there are definitely things you can do to save some money.

4. Prevents impulsive spending. Budgeting prevents you from utilizing your money on unplanned expenses. Due to the fact that you have a plan for all the money that you have coming into your home, you are less likely to indulge in unplanned expenses.

5. Puts you in control of your money. The great thing about the budget is, you are in control of your money.This allows you to prioritize the things that are most important to you.

Your budget is flexible and is meant to guide you. It changes as your financial needs change.Schedule time to regularly review your budget and make adjustments as needed.

The 3 Best Budgeting Apps

Budgeting does not have to be hard.
Using budgeting apps to make your budget, track your expenses, and monitor your progress can help you reach your financial goals faster.
As an added benefit, having your budget readily available;

• Is great for financial planning.

• Helps couples who are budgeting together to stay on track.

• Is helpful for tracking expenses.

When you start to budget, we encourage you to handwrite your budget so that you can get into the habit of tracking your expenses and being intentional with creating your budget.

3 of the best budgeting apps we have used include:

1. Mint : This personal finance application gives you the option to keep track of spending, create a budget, and work on monitoring your credit score. You can link your bank accounts and it automatically tracks your expenses. Mint allows you to track and plan your expenses in one place. The Mint app is completely free and available for both iOS and android devices.

2. Every Dollar : Allows you to create a monthly budget and track your expenses. The free plan requires that you manually update your budget, while the paid plan allows you to connect your bank account to the app so your items on your budget are automatically updated.  An added bonus of the Every Dollar App is that it gives you recommended percentages for each of the 11 categories in your budget, there is flexibility to adjust these percentages to reflect what is most important to you. There is a free plan and a paid plan. Every Dollar App is available for both iOS and android devices and it syncs across your devices.

3. You Need A Budget(YNAB) : Helps  you build a budget suited to your lifestyle and tracks your expenses from your bank accounts. You can also make adjustments to your budget as needed. It also allows you to set goals for each item on your budget. It breaks down your expenses into 5 categories : Immediate Obligations, True Expenses , Debt Payments, Quality of Life, and Just for Fun.  The annual plan is $83.99 but you can try it out free for 34 days. YNAB is available for both iOS and android devices.

The best part of using budgeting apps is that it is easily accessible on your phone.
When your budget is always with you, you can easily double-check your spending, thus moving you closer to achieving your financial goals.

A good Credit Score can save you money on your next major purchase…

A good credit score can save you money. A credit report is a broad view of an individual’s credit history. Gives information on whether an individual pays bills on time, the type of credit owned, length of accounts, amount of credit used and if new sources of credit are being sought.

Three national credit bureaus maintain credit reports: Experian, Transunion and Equifax.

Good credit = more money in your pocket

Factors that affect Credit score

1.   Payment history (35%): Ability to pay bills on time; affects credit the most.

2.   Credit Usage (30%): Amount owed. Keeping credit utilization under 30% is strongly recommended for best credit building. (For example if $10,000 total, then keep credit use under $3000).

• Credit Utilization: Utilization of available credit on revolving accounts.

•  Amount Owed on Installment Loans such as auto loans and Mortgage with set loan term and set amount of payment

3.   Age of credit (15%): Also known as length of history; Length of time your revolving accounts have been open and length of installment accounts. It is an average of ALL accounts

4.   Type of credit (10%): Credit mix. The different types of credit accounts.

5.   Credit Inquiries (10%): Authorization to look up credit. Multiple inquiries negatively affect the credit score. Grouping inquiries within the same month will help to minimize effect on credit score.

Before you develop a plan to fix your credit score, you need to know what is on it.

Check your credit report to know what is on it. Annual Credit Report is a federally approved site that offers a free annual comprehensive credit report. Check your credit report at least annually to stay on top of its content.

Creating an Emergency Fund

An emergency fund gives your peace of mind and protects your finances during a financial crisis. It serves as a cushion between you and all the unexpected events that life will throw at you.It prevents you from worrying when you experience a decrease in income, or have no income. Most of all, it makes sure your financial plan stays intact.

Money Used for things that are Urgent and Unexpected

When we were told our emergency fund was insurance preventing us from getting back into debt, we did not fully understood the concept. It was just a matter of time before the message became crystal clear. A few months after we moved into our home, AC unit needed fixing, the roof developed a leak and one of the our cars needed repairs. All of that ended up costing us about $6000.

You will have crisis in your life that will require money. Money in your emergency fund will come in handy for those unexpected but urgent needs.

How much do you need in your Emergency fund?

 
The amount of money you save in your emergency fund depends on your family situation. It is recommended that you save at least 6 months of living expenses .

Some of the things to consider prior to deciding how much you save in you emergency fund include:

• Job security

• Marital Status

• Health of income earners

• Number of income generators

• Family obligations

How to build an emergency fund

1- Create a budget: This will enable you to know what your living expenses are, and help you set a baseline of your spending. 

2-Start and be committed. Irrespective of the amount, save on a regular basis. Be consistent.

3-Automate your savings

4-Get out of debt and increase your income: Consider decreasing your spending, canceling subscriptions you are not using, selling things your don’t need or getting a second job.

Sign up for the free BFR 14-day saving challenge and start building your emergency fund today.

10 ways to protect your financial well-being during a crisis

1. Make a budget and cut back spending to focus on essentials like food, utilities, transportation, and lodging.

2. Contact credit card companies and lenders to ask about payment options to avoid late penalties, interest charges, and damages to your credit.

3. Freeze debt repayment if you are hard on cash.

4. Reinvest in yourself. Focus on building your skills or broadening your knowledge

5. Utilize your support system and take care of your mental health.

6. Need help? Contact community organizations like food banks and faith-based organizations, for assistance to help cover daily essentials.

7. Create or update your emergency plan an review with those in your household.

8. Watch out for scams. Protect your financial information.

9. Avoid large purchases and make a plan for AFTER the financial emergency .

10. Review and safeguard important documents such as insurances, living wills and durable powers of attorney.

How to stop spending: 8 ways to save money

It is very tempting to spend when you are trying to work on your financial goals. With the advent of online shopping, all it takes is a click of the mouse or a swipe of a finger and your purchase is on the way. Many shopping sites are making it very easy to save your credit card information and are using adverts to make their products harder to resist.

The good news is, there are things you can do to remove the temptation and stay focused on your goal.

1. Make a budget before the month ends and before you receive your income and make sure you stick to it.

2. Cancel subscriptions you are not using. The cable that you barely watch, or the gym you have been planning to go to are all recurring expenses that steal your income.

3. Unsubscribe from newsletters and emails.Those deals that are delivered in your email are a trigger for you to spend. So why not remove the trigger. If you do not know there is a deal, you will not go looking to buy. A good app to use to unsubscribe is unroll.me app

4. Use coupons, discount codes and cash back apps to shop. Make sure you are shopping for things that are on your budget. Honey will give you coupons and compare other sites for cheaper prices for your purchases. Another site, Rakuten gives you cash back on purchases you make.

5. Use cash. When you use cash, you feel the weight of your spending. Remove your credit and debit card information that is saved online. When you have to input that information every time, it gives you a few extra seconds to rethink your decision.

6. Use a shopping list when you go out grocery shopping

7. Negotiate your bills with service providers.Most service providers have loyalty programs for longterm customers or discount programs to keep customers. So before you commit to your next billing cycle, make sure you are asking for a deal. What is the worse that can happen?

8. Plan meals. Planning meals helps you with your grocery shopping and also reduces impulsive shopping. The random trips to the fast food restaurants because you cannot figure out what to cook is $30 extra dollars you have saved. Plus, you can get the family involved and make it a fun, family bonding activity.