Budgeting Your Finances By Priorities

If you value living debt free, but have too much month at the end of your money, a budget is a great way to live, and prosper, on what you earn. Out of control finances is a powerful source of stress. But getting your finances under control brings peace of mind.

Let’s build a budget based upon priorities. What is most important to you? Fun or Future?

If you aren’t living at home with Mom (or don’t want to end up going back there), then your home is probably your first priority. And, the utilities are part of that priority, unless you want to use candles for light and a wood fire for cooking!

Next might be your expenses related to employment. Why is this a priority? If you don’t keep your job, then your budget will be easy: nothing divided by priorities still leaves nothing! What does it cost to go to work? Gas and tolls to get to work and return home are work expenses. Clothing and care of clothing are also work expenses. A secondary expense for employment includes car payment and maintenance.

Let’s see what we have so far:

1. Mortgage or rent
2. Utilities (electric, gas, water, etc.)
3. Gasoline and tolls
4. Vocational clothing and care expenses
5. Auto payment and maintenance

Next we need to protect these investments with insurance. Protecting the investment of your health (so you can work) means health insurance. Protect the investment in your home with home or renter’s insurance. And, protect your investment in your automobile with car insurance.

6. Insurances (health, home and auto)

Food. Budget for eating at home and at work.

7. Food

By now you may be starting to realize that failing to manage your money has put you into debt, and you can’t spend just whatever you want whenever you want and still have money for necessary expenses. It is an adult reality of life that we have to live within our means. (That means “if you ain’t got it, don’t spend it”.) Otherwise we end up in the sticky pit of debt, debt and more debt.

It is time to plan to invest in your future. This includes life insurance and savings. Putting money in a savings account is a way to pay yourself and prepare for future emergencies. If you value being self-sufficient, then you will prepare for your future. Failing to plan is planning to fail.

8. Life insurance

9. Savings

Now, here is the problem. Most people put their entertainment and personal interests ahead of essentials. We haven’t even discussed those in this budget, because we are budgeting by priorities.

Is there anything left over after going through this budget? If so, enjoy! If not, then if you want to play, you will have to find ways to cut back on the essentials. Financial management requires that we live in a home that we can afford. If your mortgage or rent is too high for your income, you probably need to take a heavy dose of reality and downsize.

Are you paying too much for utilities? Manage your use of electricity. Turn electrical devices off when you aren’t using them. Shop for a better electricity rate. Change the settings for air conditioning and heat. Get your utilities within your budget.

Your car payment is a possible variable. If your payment is too high, then consider trading cars. You can trade down and get a lesser payment. Do you need the vehicle you drive, or are you driving your car or truck for show and prestige? Get your values straight and drive a car you can afford that will get you where you need to go until you increase your income and can afford a luxury auto.

One other thing: children. If you have children and can’t feed them and pay school expenses because your house and car are for show, ask yourself if you really love your kids, or yourself, more. Get honest about what your real priorities are, and think about whether you need to change your priorities.

Five Simple Steps to Clarifying Your Priorities

So many people think that they have priorities. They know that their jobs and families are priorities. They know that eating well and exercising are priorities. So why are so many people over weight, stressed out, out of shape and divorced?

There is a difference between knowing what should be a priority and actually setting and sticking to them. So if you think you know your priorities, but have a chaotic, unsatisfying life, it’s time to think again and then reassess!

First thing you need to do is to create a life vision. When you know exactly what you want for you life, you can easily assess what needs to stay and what needs to go. Create a vision board or journal what you want your life to look like. Make sure you cover all life areas: Career, Finances, Personal Development, Family, Relationships, Fun, Health, and Environment.

After you have your life vision compare what you have right now, to it. Where are the disparities? If you want to be fit and healthy, what is stopping you? Why are you 40 lbs over weight? What excuses are you giving yourself?

Now start to clear out the “clutter.” Keep in mind that there is emotional, physical and mental clutter and it all needs to go. Physical clutter (like a messy office), lead to mental clutter (trying to remember where you put the Visa bill and if you paid it) which leads to emotional clutter (going shopping to escape the stress, which then results in more physical and mental clutter!). Anything that doesn’t fit into your life vision needs to go.

While you are clearing the clutter you have to remember to stop the flow of things into your life. You need to learn to say no. Think of this as self preservation instead of selfish. When you take good care of yourself, you have more space to give from love instead of from resentment or obligation.

The last thing you need to do to help clarify your priorities is listen to your gut. You probably have people and things in your life that make you feel uneasy. And yet they stay in your life. Why? Your intuition is trying to tell you something so you should listen!

Those five things should help you at least get started on viewing your life. You deserve to only have people, places and things in your life that represent who you are and help you attain success, happiness, health and wealth.

Dealers Know: Car Loans Take Priority

According to TransUnion reports, auto loans top budget priority payment lists. Even the crash of the housing market, homes loans still fall second to car payments. The mortgage delinquency rates push beyond 30 days yet this expense still takes priority over credit card debt. It makes sense. Why fall short on secured loans when there is personal property at stake? Credit bureaus are not the only eyes watching this trend. Car dealers have taken notice and they are taking advantage of consumer’s eagerness to pay.

Dealers will push a brand new car. Who can resist the smell and sleek interior? It’s a nice thought to be able to get all the latest bells and whistles. It’s okay if your credit score is less than perfect. Dealers have the proof they need that customers are willing to make their loan payment. The salesman will make it is easy to afford the installment loan payment even for those with sub-prime credit. By extending the term of the loan to 5 – 7 years, the finance department will manipulate the payment plan to fit your budget. You probably will never even notice what interest rate you are paying. The excitement of a loan approval will often fog those details. Long loan terms equate to lots of interest charges. It’s a small detail the finance department will probably choose to omit from their convincing speech. Don’t want to pay the extended interest payment? The dealer will understand and lead you to the used lot.

There is a sale’s pitch waiting for the buyer in a used lot as well. Many car lots only focus on used vehicles. Dealers know that many consumers don’t want to drive off the lot and immediately lose a chunk of the car’s value. A used car is not only more affordable than a brand new one, but you can get a reliable vehicle for a lot less money. Consumers ditch the brand new car smell for more affordable payments. As with new cars, finance plans can create very low monthly payments using extended terms. A smaller payment will help the budget. Car shopping, whether used or new, is an exciting time.

Customers are willing to make their car payments. Dealers take advantage of this situation by inviting sub-prime customers to their lots with pre-approved loan notices. Similar to credit card companies, pre-approved notices are mailed to attract new customers. Higher than average interest charges are welcomed for many who thought they would never be able to buy a decent vehicle. The dealer understands. Not only are the offers high interest, but the loan itself is secure with the vehicle as collateral. Dealers are in a win-win situation when offering a hand to those with credit challenges. It doesn’t matter to the salesman that the customer may not be able to afford other living expenses. They have their own paycheck to worry about.

What consumers should consider before purchasing a car –

– Loans with terms longer than 60 months. The final ending price inflates from interest costs. Pay extra whenever possible to decrease loan term.

– Pay attention to interest rate costs. You pay attention to credit care and payday loan interest, do the same for your car payment. Shop around for a better price or hold off on your purchase until you can raise your credit scores.

– Refinance if your credit improves over the 5-7 year term loan.

– Make sure you can afford maintenance and upkeep. Parts and labor are more expensive for higher end cars.

As good as it feels to be able to buy a car, the rest of your budget must keep up. Focus on making good on car payments so you don’t forfeit the vehicle as collateral. Make sure that extra cost will not interfere with all other budget demands as well. A smart budget shopper will fit it all in.