The truth is, the banks don’t want you to know about the fees on their products or how the interest is calculated on your credit card because they don’t want you to know how to avoid them. Therefore, you need to take control of your financial education and find out the top five things your bank will avoid telling you.

1 You can earn interest on your interest

When you talk about savings accounts this is a positive thing because compounding interest allows your funds to grow faster because you are earning interest on your interest and on your principal balance. However, when it comes to your credit card this is not good news because if your interest for the next month of your credit card cycle is being calculated on interest which has already been applied to your account from the previous month then you are being charged interest again and again.

This is not a common practice among all banks, but all of the big banks do it and most of the second tier banks too. Not only are you probably being charged interest on your credit card interest, you could also be being charged interest on your fees. Some credit card providers will simply take the closing balance of your account – including your purchases, your interest charges from previous months and any fees which have been added to your account – and calculate interest for the next month based on the entire balance, rather than just on the purchases you have made.

2 You’ll be charged the cash advance rate at the end of a balance transfer

You may already be aware that if you have chosen a limited time balance transfer offer, that any balance remaining at the end of that period will be charged a higher interest rate. However, what you may not have noticed in the fine print of many balance transfer offers is that this higher rate is not just the credit card’s purchase rate, but is the cash advance rate which can be another 5% higher than the standard purchase rate of the card.

3 Your credit card payments may not register

Your credit card statement will arrive on the same day each month, and your payment will be due on the same day each month. However, if you make an additional payment to your credit card outside of the specified payment period, that amount will not go towards your monthly payment – even if it is enough to cover the monthly payment – and your account will register as being in default.

This is because you have not paid the amount during the right period, and even if you have extra funds available and want to pay your bill early to get a jump on the next month, your payment will be received as an additional payment and will reduce your balance, but unless you make another payment of the amount due before the due date, your account will be in default.

4 Fees and interest charges are variable

On a high interest savings account, the interest rate your savings earn is variable and you can only receive a fixed interest payment in a term deposit account. Similarly the interest rates charged on your credit card are subject to change, and while the banks are required to notify you of a change in interest rates, there is nothing you can do to stop the change. The fees on a credit card or transaction account are not fixed either and can change at any time, meaning an account with a reasonable annual fee can suddenly have a much higher fee than the competition.

5 Automatic reinvestment of term deposit

In the fine print of a term deposit account you may find that unless you specify to your term deposit provider in the specified time window what you want to do with your funds at maturity, they will automatically be reinvested. This can mean your entire principal and all of your interest earnings are rolled over into a new term deposit account, for the same term, at the new interest rate. The interest rate on your term may have been competitive when you opened the account, but during your term your provider could have changed their rates, and they could lock you into a term with a lower interest rate than you would have chosen. Most term deposit accounts will not change their fees of interest rates during your term, but look for the place in your fine print where this is spelt out, just to be sure.

Just because the banks are in the business of making money from your money, it doesn’t mean you can’t arm yourself with the information you need to beat them at their own game. It is possible to secure high savings account interest rates, avoid credit card interest rates and choose bank accounts with $0 fees so your money works harder for you, not for your bank.

Alban is a personal finance writer. He helps people to compare and choose the best credit cards online

A lot of people don’t track their expenses. Once they receive their paycheck, they just spend their money without keeping a record of it. They buy this, they subscribe to that and in the end they are shocked for nothing’s left in their pocket. They wonder where the money goes.

If they’d just keep a record of their expenses, then everything might just fall well. It’s not really hard to track your expenses. Start by carrying a small notebook and record all your spending, however small or big it is. You can also use a 3 x 5 card, a computer text file, or a spreadsheet. Any of these will do.

You can use this as a guide for your budgeting. Here are some advantages of having a record of your expenses:

• You will be able to identify the areas where you spend a lot, then find ways on how you could trim the expenses.
• You will find all the unnecessary spending you’ve made and try to eliminate this as well.
• It will help you budget your money by spending just the right amount, not exceeding your monthly net income.

It would be easier for you to track your expenses if you will save your receipts and record all withdrawals you’ve made. Make a habit of putting all your receipts in one place so that you know where to find them

You can do this tracking every week, or every month. It really depends on how you want it. What’s important is to make it a habit. In the end, you will be amazed how this thing could improve your financial activity.

By tracking every penny you have, you will be able to control your money, not the other way around.

Is staying home with your family watching television making you bored out of your mind? Why not spend your time wisely with these cheap family activities? Here are some possibilities:

1. Visit the nearest mall. Malls are often decorated festively – especially during holidays. You can take this as a chance for your family to hang-out and enjoy your time together. Going to mall doesn’t mean buying stuff, etc. You can simply visit the exhibit or the show and eat hotdogs or ice cream.
2. Visit the park. This is also a nice way to spend family activities. Enjoy the swing, see-saw, and slides with your children. Prepare a home-made snack as well for the little “picnic” in the park. You may even want to bring a camera to capture every smile, yell and laughter of every family member.
3. Visit relatives. Well this is a great idea especially if you only got to see them once in a while. This will keep family-ties together. Visit them, have light conversations with the grandparents, cook with your aunts, play in the playground with cousins, etc.
4. Camping in the backyard. This is also one of the cheapest ways to have a family activity. Just bring out the tent; you could also do some grilling outside (barbeque, hotdogs). Make some games like hide and seek.
5. Watch shooting stars. On a nice evening, you can go outside, bring a blanket and lay – down comfortably. You could trace constellations as well. Ghost stories could also spice up the evening.
6. Just take a walk. You could bring your pet with you and just take a walk with your children.

Family activities don’t require much effort, time, and money. You just have to be creative and think of new ways you could spend great time with your family.

Paying off debt is quite a hard task for anyone who is buried in financial struggles. You might not know where to start just to lessen the burden of being in a debt crisis.

There are a lot of ways to manage your financial problems and eliminate your debts. Debt snowball is just one them, it is a very powerful tool to answer your paying- off-debt problems.

It’s a pretty simple technique, thus anyone could truly follow how it works.

1. Make a list of all your debts.

2. Make an ascending rank of these debts according to the amount ( from smallest to highest)

3. Make a minimum payment on all your debts except to the smallest.

4. Pay the most on the smallest debt until it is paid off.

5. Once that smallest debt is paid off, focus on the next smallest, making the same payment you had been making on the smallest debt plus the minimum payment you had already been making on the second smallest. This builds your snowball as you move through the list.

6. Repeat the process until all of your debts are paid off.

Some experts might recommend listing your debts according to the interest rate. Prioritize the one with the highest interest. In that way, you can save the most money by reducing the debts that grow faster because of the interest added every month.

It really depends on you which one you would follow. What’s important is you are making a way in reducing or eliminating your financial problems.

Once your debts disappear, go and celebrate! You will need this to encourage you in solving your financial problems. It requires a lot of courage and sacrifices for this to work. Once you’re successful in paying off your debt, you will learn the lesson from it. You will know how to value your money and to control it the right way.

An emergency fund is a cash reserve that you keep in a safe place and use only for any unexpected financial emergencies. It can be a separate account, such as checking or savings accounts so you could have a quick access in emergency situations.

The purpose of the fund is to improve financial security by creating a safety net of funds that can be used to meet emergency expenses as well as reduce the need to use high interest debt, such as payday loan, cash advances, and credit cards, as last resorts.

It might be hard for some people to create an emergency fund especially if they have a tight budget. But the truth is, it’s not that hard to save for this fund. Here are some tips on how you can start creating an emergency fund:

1. Start small. Maybe you can start at $50 a month. A little goes a long way especially when it comes to savings. Just start. It will slowly grow and you will be glad to see at least a little in your savings, and will soon be motivate to try to save more.

2. Spend less. Focus on basic needs not wants. Don’t buy unnecessary things. You have to spend less in order to save money. Instead of subscribing for a monthly issue of magazine, why not save it and put it in your emergency fund? Cut out your luxuries and just save the allotted amount for your future needs.

3. Set up automatic deposits. Make saving easy by scheduling automatic deposits to your emergency fund. You can set up an online savings account that would automatically deduct an amount every payday.

4. Prioritize your emergency fund. Treat your fund as one of the regular bills you’ve got to pay, an obligation you have to fulfill. Set a due date for it, such as your payday, so you will not forget to “pay” your fund.

5. Make extra income. Take your skills and market them as a freelancer, or get a second job on the side. You can also start a small business at home. Take the extra income and bank it. This is one of my strategies, and it works great.

6. Set a time frame to complete the fund. You can set a possible time frame to reach you goal – for example, to finish your emergency fund in a year. That will be possible if you will believe in yourself.

7. Sell some stuff. Make use of eBay, Craigslist, or other classifieds services to sell things of value around your house. Is that DVD collection you never watch really more important that your financial security?

With a little effort, you can start saving and prepare not just yourself, but your entire family for future emergency situations.

Family vacations are sometimes hard to schedule because it requires a big budget. Most of the time, we parents, set aside money for more important things like education, foods, bills, etc rather than saving for a vacation. But there are family vacation ideas that are in a budget and at the same time, be enjoyable for your family as well.

Why not organize a vacation in your relative’s place for a couple of days? This idea is really inexpensive for you don’t have to make hotel accommodations anymore. You just have to make sure that you get along well with these relatives, and of course, they allow you to stay with them. This idea could even tighten your relationship with them.

Another suggestion is a camping vacation. This includes hiking as well. This could be a lot of fun for your kids especially if they love nature. Camping is always one of the best ideas for its cheap but very educational for it builds self reliance, confidence, and boost your child’s self esteem. This idea doesn’t require a high budget because all you will need is a tent. Again, you could just save the hotel fee and allot it for your food budget instead.

Vacation doesn’t necessarily mean that you have to go to other place away from your home. You can simply have a vacation just by staying home for a week with your family. Take this chance as a bonding time with them. You can simply watch in your home theater with your kids while eating homemade pop corn and pizza. Take this time to teach your kids your very own recipe. Also, don’t forget the board games and hide and seek. You can also play backyard table tennis or simply jump to the pool if you got one.

There are a lot of ideas you could consider to take your family for a vacation, just be creative and use your imagination. Also, don’t forget to ask for your family member’s ideas as well. They might have the best possible way to spend your vacation in a budget.

Payday loans are a small, short-term loan that is granted to borrowers to cover expenses (mostly intended for emergency situations) until they receive the next paychecks. The borrower must repay the total amount of the loan plus fees, most of the time, at a very high interest rate. The lender may process the check traditionally or through electronic withdrawal from the borrower’s checking account.

It is commonly called as “cash advance”.

If you’re thinking of applying for a payday loan, have a break. Think twice, and consider the following disadvantages to help you decide.

High interest rate.  Typically, payday store charges $25 for every $100 borrowed. This is because, there’s no collateral (like credit check) required.

Delays. Some payday store deposits the money right into the borrower’s checking account, thus causing some delays for the withdrawal of the money. This is not good for emergency situations.

You must repay the full borrowed amount for a span of 1 month.  This will let you sacrifice your budget for other needs. Most borrowers can’t repay the full amount in a month. The tendency is they extend the term. Leaving them the option of just paying the interest every month, thus causing more problems in paying off their debt.

You can’t ask for a specific amount. The payday store decides how much they will grant depending on your monthly income, checking account transactions and other variables. The amount you get might not be what you’re looking for.

Fraud issues. This is especially applicable to the online payday loans. They will hook the borrower with their impressive – looking website. Borrowers, not knowing of the hidden charges, might get in a deeper debt because of these scam companies. Thus, extra precautions are advised when dealing with online payday stores.

Having an emergency fund is the best answer to avoid getting into payday stores. Right budgeting is the key to have a debit-free life. Start saving now and have a peaceful mind, not worrying of unexpected expenses you might encounter in the future.

Not everyone wants to be a grocery guru or coupon queen. The following list will help you save money on your grocery bill without cutting coupons and watching for the latest & greatest sale prices. While this works and it is a great way to save money, not everyone has the time or interest. This article will show you ways you can make the best use of resources so you are not wasting food, and how to cut down on trips to the grocery store.

1. Start by making a list of dishes you like to eat. Think back on what you have eaten the past couple of month, or meals that you really like that you haven’t had in a while.
2. For each meal, make a list of ingredients you will need to make the meal.
3. For each ingredient, put a number between 1-4 representing how long the ingredient generally lasts. For example, if the menu calls for fresh vegetables, put a one next to the vegetables. If the menu item is something like spaghetti, noodles and spaghetti sauce can store much longer so you can put a 4 next to these ingredients. Based on the numbers in your ingredients, use the lowest number and write that next to your meal. This number will help in planning later.
4. Determine how often you want to go to the store. This will vary by family. Some families can manage to go to the store once per month. Others go every other day. It will depend on your circumstances. For example, if your family goes through 4 gallons of milk in a week, and that is all the milk you can store in your refrigerator, you will need to go each week. I would guess that most families can get by going to the store every two weeks. The less trips you plan to make, the less likely you are to overspend.
5. Raid the fridge. Go through items you currently have. Make note of items that may go bad or expire soon so you can be sure to use them in your meal plans.
6. Plan your meals. Print out a blank calendar. CalendarsThatWork.com has many calendars you can print out for free. Using your list of meals and make a plan for the time period you have specified in the previous step. So, if you have planned to go to the grocery store every two weeks, plan two weeks worth of meals. Us the numbers from step 3 above to help you plan. So, if you have a meal that contains ingredients that go bad after only one week, put that meal in the first week of your plan.
7. Create your shopping list. Using your meal plan, determine the ingredients you are lacking in order to make each meal. Get the adequate amount of ingredients for each meal.
8. Buy your groceries.
9. Stick to the plan! You may not feel like eating something you have planned. If this is the case, try swapping out meal days. Avoid the temptation to eat out. If you want to eat out, put that in your meal planning before you go shopping.

Other useful tips:

• Never go shopping on an empty stomach. This is when you will tend to splurge. Eat a hearty meal before doing your grocery shopping.
• Stay within a budget. Set a limit on how much you want to spend on food each grocery trip. Plan you meals according to the amount you have budgeted to spend. Put a set amount of cash in an envelope each pay-check you get  in order to prevent overspending on your groceries. You may also make use of envelope budgeting software for more convenience.
• Buy non-perishables in bulk. As you continue to follow this plan, you will find some meals are cheaper than others. If you eat a particular meal on a regular basis, you may find it cheaper to buy the non-perishable ingredients in bulk.

Remember, when you fail to plan, you plan to fail. A little bit of planning ahead of time can stretch your dollar a great deal and help you save money on groceries and eliminating the need to through out expired food.

Leasing a car means using a car for a fixed period of time at a stated payment with no form of ownership included. The car must be returned at the end of the lease. In many leases you will have the option of buying the car at the end of the lease.

People who like to drive a new car every few years will usually pay less by leasing than buying a new one. Also, they don’t have to deal with getting rid of their old car — they just turn it in at the end of the lease period. As a result, many people lease in order to drive a more expensive car than they could afford to buy.

Although you may be eager to drive an expensive new set of wheels, consider the following disadvantages to leasing a car before you make your final decision:

• No Equity — your lease payments don’t go towards owning anything. If you look forward to paying off your car and owning it free and clear, don’t lease.
• You may pay extra – The lease states out how many miles you may drive per year; if you drive a lot and you fail to consider this, you could be paying a lot of extra cash at the end of the contract. Also, you’ll have to pay up for any damage to the car beyond normal wear and tear when you turn it in. In addition to that, If you decide to buy the car at the lease-end, you’ll pay several thousands of dollars more than if you had bought it initially.
• Insurance May Come Up Short – If you total the car or it gets stolen, your insurance will only reimburse you for the car’s market value, which might not cover what you still owe on your lease. You can buy extra “gap coverage” to protect against this and some lease deals include it automatically.
• You don’t have a car – This is pretty obvious. With a lease, you don’t actually own a car. When the contract is up, you have to give it back and you got nothing left for you.
• Stuck in a bad situation – If circumstances happen to change in your life, and you can no longer afford the lease payment, you will have a very difficult time getting out of your situation. Owing more money on your car than the car is worth is often referred to as being “upside-down”. It is not a good place to be!

The bottom line is this: there are too many risks to leasing a car. Many car dealers will give you all the reasons why you should lease a car. They will neglect to give you the reasons you SHOULD NOT lease a car. Don’t learn how to buy or lease a car from a dealer! In most cases you will come out ahead by saving up and buying less car than by leasing a new car.

Are there nights when you can’t sleep because of the overwhelming debts you have? Actually, paying off debt is one of the most hard-to-solve financial problems. It seems like there’s no solution once you bring yourself in debt. This article will show you how you can pay off your debts with an eliminate-your-debt program.

Tips in paying off your debt:

1. Have faith that you can do it

You have to believe and trust yourself that you can do eliminate your debts even one step at a time. Once you believe in yourself, you’re ready to do the necessary actions.

2. Set your goals.

Your goal is to eliminate your debts. You have to commit yourself in your goal in order to attain it. Setting a target date when you will be able to meet this goal could be your map to measure your progress. This will help you to get more focused and headed in the right direction.

A goal not written down is only a wish. Write down your goals and the date you wish to accomplish them.

3. Create a debt elimination plan.

List all of your debts along with minimum payments. You can order them by smallest amount first, or highest interest rate first. Pay minimum payments on all of your debts. Whichever debt is at the top of the list, put any extra money you can squeeze out of your budget on top of this one. Once the top debt is paid off, take the money you were using to pay for this and apply it to the next one on the list. This is often referred to as the “debt snowball”.

Once you prepare yourself in eliminating your debts, you should stop incurring more of it. Paying off debt may seem tough, but you can use some strategies to make it possible. One way is through using balance transfer credit cards. This can be done by transferring your debt from a higher interest credit card to a lower interest credit card. This will speed up the debt elimination process, but think also of the consequences in doing this. Balance transfer could come with fees.

4. Make paying off your debt as your primary financial goal.

There is power in focus. Make sure that you will stick to your plan to be able to reach your goal. You should avoid temptations, like impulsive buying. As for the unexpected expenses, make sure you have an emergency fund where you could get the money from. Avoid using credit cards for emergency expenses. This will just worsen your financial issues.

5. Simply record your progress in elimination your debts

You could make a chart for your financial progress by tracking your credit standing before, during and after the debt elimination program. As you see your debts decrease over time, this will provide motivation to keep going.

6. Have a break.

Give yourself a break once in a while by treating yourself to simpler rewards when you reach certain milestones in your plan or debt reduction schedule.

7. Think of strategies to increase your income.

You could reach your goal easier if you will cut back your expenses and work more to gain an increase to your income. You could start a simple business or get a second job as a part-time. This will accelerate your debt repayment.

From these few sacrifices you will find the extra dollars needed to increase your debt repayments.

With determination, focus and belief in yourself, you can definitely reach your goal – to pay off your debts.

Dealing with debt collectors becomes easier when you’re aware of the tactics, basic laws and consumers rights that can hinder them from ruining your life. No matter why you ended up delinquent on your accounts, dealing with debt collectors is humiliating and infuriating. Negotiating with debt collectors in order to clear the debt is a good option. However, there are a few steps that you can take to ensure that you will not be taken advantage of.

1. Find out if they are an actual Collection Agency (CA).

If the collector is under a CA, then you have a good chance of settling a lower amount with them. CA has to make money no matter what, for they might have purchased your old debt for pennies on the dollar. This gives you a chance to negotiate for a smaller overall payout.

2. Don’t hide.

Never avoid them. If you do this, things may get worse. The collectors may take you to court and get an order against you. If you need to buy extra time, you can request that the debt collector provide you with proof that you actually do owe the debt. This gives you about thirty days to come up with the money to pay it, and during that period, they are not allowed to contact you.

3. Track your conversation.

Keep a record of the bill collectors you’ve spoken to, the time and summary of your conversation. This can be your proof against bill collectors who violate the law. You can even tape the conversation (secret taping is allowed by 35 states and the District of Columbia). But if this is not allowed, just take the collector’s permission before you tape the conversation.

4. Read the FDCPA.

You have rights, but your debt collectors are putting money on the fact that you may not know them. The first step is to read through the Fair Debt Collections Practices Act. This tackles the dos and don’ts when collecting payments. You can get some great tips on how to handle the situation from this act and your debt collector’s won’t be able to pull the wool over your eyes any more.

5. Don’t be threatened.

Debt collectors can be very shady. They will threaten you with criminal arrest, they’ll threaten to ruin your reputation. Legally, they cannot do this. You cannot be arrested for a bad debt, unless there is a bad check involved. Once again, read the FDCPA act to get a clearer understanding of all of your rights.

The FDCPA has a reporting system in place where you can get assistance if you are being harassed by a creditor or a collector. If you are getting calls in the middle of the night, being unduly harassed or actually threatened, you do have recourse.

6. Use Cease and Desist Letter

In case you wish to contact the creditor and deal with him directly regarding payment of your debt, you can request the CA to stop contacting you. This can be done by sending them Cease and Desist Letter.

Teach your child the value of saving and spending wisely. It is never too early to learn about how to budget and save money. Early education about money will prepare your child in their future financial life.

Educating, motivating, and empowering children to become regular savers and investors will enable them to keep more of the money they earn and do more with the money they spend.

7 valuable lessons you can teach your kids about money:

1. Give them control of money. I suggest giving your kids a set amout of money on a regular basis, for example $5 per week, and let them decide how they will spend it. The result will either be they’ll be spending too much on unimportant stuff or they will save it and cut back on other areas. In this way, you are helping your child to develop their own decision making skills thus they will learn to be responsible for themselves.

2. Teach them that reducing expenses makes goals come faster. Tell them that if they spend less on trivial things, they be able to buy the big things they want sooner.

3. Teach them to save and to give. You can give your kids for example, $5 every week. A good rule of thumb is to save 10% and to give %10. If you are religious, giving 10% in tithing is an excellent example. Show them how their savings can increase with time and that the more they save, the greater the increase. For example, demonstrate how $1 per week will grow. $4 in a month then $52 in a year!

4. Keep good records of money saved. You can create a bulletin board at home where your kids can see the improvement of their savings. In that way, they’ll be more excited to save more for they can see how their savings grow. Saving for a goal can also be helpful. Post a photo of something they desire to achieve with their savings to help keep them motivated.

5. Alert your kids to the dangers of borrowing and paying interest. If you charge interest on small loans you make to them, they will learn quickly how expensive it is to rent someone else’s money for a specified period of time.

6. Teach them about advertising and consumerism. Show your kids how to evaluate TV, radio, and print ads for products. Teach them that not all products on sale are always the best buys. Teach them the value of quality over quantity.

7. Establish a regular schedule for family discussions about finances. This is especially helpful to younger children–it can be the time when they tote up their savings and receive interest. Other topics should include the difference between cash, checks, and credit cards; wise spending habits; how to avoid the use of credit; and the advantages of saving and investment growth.

These tips can help your children build their interest in saving money, teach them how to spend money wisely, and show them the advantage of budgeting for their future financial growth.

The wife bought a $100 watch for a special occasion, not knowing that her husband intended same $100 for the electric bill. Start of an argument.

The husband brings home an apple laptop that he purchased for $1500 and finds out that his child was admitted to the hospital and they need the same amount for the hospital bill. Another argument.

It is always advised that married couples should discuss their budget before getting married to have the same set of goals that they will be working towards. However there are times when the two of you might not be in agreement when it comes to your finances. You need to work to resolve these differences quickly.

Here are steps you should take when budgeting with your spouse:

1. Calculate your monthly net income first. Include take-home pay for each spouse, along with any additional income.

2. Compute all your shared monthly expenses. Include rent/mortgage, utilities, car payments, car maintenance, insurance, average monthly grocery expenses, and so on.

Bear in mind that your total monthly expenses should be less than your monthly net income, if it’s not, then you have to think of possible ways you can trim your monthly expenses to make ends meet. How can you increase your income through a second job, freelance or other legal means?

3. Allocate a reasonable monthly allowance for each spouse. This includes daily expenses for meals, snack, transportation allowance, salon, gasoline, car maintenance, etc. Be sure to include money that you each can spend on what you want each month that is for you to spend however you see fit like a new pair of shoes, etc.

Make sure that the combined allowances and monthly expenses is less than the net monthly income. If not, then again, think of possible ways you can trim your monthly expenses to make ends meet.

4. Decide what to do with the “remaining money”. Cover your options and determine the best ways to allocate your remaining money. For example you may want to put some amount for the emergency fund, start saving for a new house, etc.

5. Agree on who will manage the bills. It is recommended that the one who is better in computation/ math be the one to do this. The task includes checking bank accounts if there is enough money left, paying the bills, allotting money for the monthly expenses, etc.

If you and your wife have financial issues take time to talk. Sit down and have a discussion with your spouse where you simply listen to her concerns about the budget. Set your goals together. Some people are not planners, but once they realize that the budget will help them reach their goals they are more willing to work on a budget. Remember, open communication is the secret in a happy and a smooth-sailing relationship.

Noel A. Dalalo is the Marketing Specialist of  Inzolo.
Inzolo.com helps you budget your money and bring you peace and tranquility as it relates to your financial life.
To learn how to budget your MONEY using a Budget-System Tool absolutely for free, visit http://www.Inzolo.com and join today.

There are many different ways to budget your money. For those who lack will power or often go over budget, methods like the envelope method work wonders. This method teaches budgeting by strictly cutting off your resources and allowing you a very small amount of money to work with each week. It sounds harsh, but by the end of just a few months you will be living like you were never on a budget and saving a lot of money at the same time!

The Envelope System, popular years ago, involved setting up envelopes, allocating your monthly income to expenses, and then putting the required cash into each envelope. The term Zero Based Budgeting came about because all money was allocated to envelopes and therefore “budgeted to zero” each month.

One of the best ways to manage your budget is to use The Envelope System. This budgeting method is so effective that it has become one of the recommended tools for personal finance.

The Envelope Budget System in Eight Easy Steps:

1. Start by tracking your daily expenses. It just takes a few extra minutes each day.

2. List down all you monthly expenses. Consult your daily expense notebook to check some items which you might have forgotten.

3. Group the list into categories. Make sure that you include everything. You can start by grouping them into general categories such as Shelter, Food, Clothes, Utilities, Transportation and Personal.

You can also choose to further divide them into subcategories until you have a comprehensive map of where exactly your money goes every month.

4. Get some envelopes and label each of them with the expense classifications you defined. When you’re done, add one more envelope and label it, Pay Yourself First.

5. Next, create a budget. Distribute and allocate your current income into the envelopes. Make sure that you fill in the Pay Yourself First envelope before the others.

6. Keep your envelopes in a safe and secure place.

7. Plan your day ahead and bring the envelope which you might need for your expenses. You can choose to bring just a certain amount and not the whole envelope for security purposes.

For example, if you’re planning to go to the mall with friends, instead of bringing your Food Envelope, which usually contains a large sum, just get a few bills. Do the same for your Transportation and Personal envelopes.

8. At the end of the month, whatever is left in the envelope is carried over and added to the next month’s budget. That’s why it is important not to spend everything in the envelope, so that you can save up for bigger purchases and unexpected expenses.

For example, if your monthly clothing budget is just $20.00, then you will be inclined not to spend it if you want to buy a $40.00 pair of jeans next month.

Additional Notes:

• Put your receipts into the envelope from where you took the cash from. That way, you’ll be able to easily track exactly where your cash was spent on.

• Instead of carrying over what’s left towards next month, you can also choose to deposit the money left into your savings account.

• It is recommended that you use your income from last month for your current month’s expenses. All your earnings for the current month should be kept and saved for budget allocation next month. If this is not possible then try to adjust your spending habits until you have achieved this.

• Try not to “borrow” money from other envelopes. You should discipline yourself to spend the allocated money only for its assigned category.

Remember that this is a dynamic process; the Envelope System entails constant planning, tracking, analysis and adjustments to your budget allocations and spending habits until you have successfully gotten yourself out of debt and comfortably living within your means.

And lastly, the best part of doing this envelope system is that you don’t have to worry much about saving money because your Pay Yourself First envelope is automatically doing that for you.

These are few advantages of the Envelope System:

• Those who do better with the physical representation of money can visually see where the money is going.

• You can’t over-spend with this system. If the envelope is empty the spending is done.

• It eases the temptation to dip into savings. Since you’ve already allocated the money there, you have to make the most of your play money

One thing to keep foremost in your mind when setting up your family’s budget is to make it a workable budget for you. Don’t make it to strict that you are setting yourself up to fail. If you slip and it doesn’t work out, try again next month. Don’t give up! All new things take time and patience to learn.

References:

http://ezinearticles.com/?The-Envelope-Method&id=257722

http://www.debtsteps.com/envelope-system.html

http://fitzvillafuerte.com/envelope-budget-system-tutorial-video.html

A zero-based budget is one where your total income minus your total expenses equals $0. In other words, it forces you to assign every dollar of income to an expense (or savings) category. In business, a zero-based budget starts from a “zero base” and every function within an organization is analyzed for its needs and costs. Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.

Zero-based budgeting is basically putting a name to every dollar that comes your way. It starts with your income side of the equation, and line by line, the total subtracts as you allot amounts to each category, until you are down to zero.

The term “zero-based budgeting” is sometimes used in personal finance to describe the practice of budgeting every dollar of income received, and then adjusting some part of the budget downward for every other part that needs to be adjusted upward. It is more technically correct to refer to this practice as “zero-sum budgeting”.

Zero based budgeting is an alternative approach that is sometimes used particularly in government and not for profit sectors of the economy. Under zero based budgeting, managers are required to justify all budgeted expenditures, not just changes in the budget from the previous year. The base line is zero rather than last year’s budget.

Zero based budgeting also refers to the identification of a task or tasks and then funding resources to complete the task independent of current resourcing.

Advantages of Zero-Based Budgeting

1. Efficient allocation of resources, as it is based on needs and benefits.
2. Drives managers to find cost effective ways to improve operations.
3. Detects inflated budgets.
4. Useful for service departments where the output is difficult to identify.
5. Increases staff motivation by providing greater initiative and responsibility in decision-making.
6. Increases communication and coordination within the organization.
7. Identifies and eliminates wasteful and obsolete operations.
8. Identifies opportunities for outsourcing.
9. Forces cost centers to identify their mission and their relationship to overall goals.

Disadvantages of Zero-Based Budgeting

1. Difficult to define decision units and decision packages, as it is time-consuming and exhaustive.
2. Forced to justify every detail related to expenditure. The R&D department is threatened whereas the production department benefits.
3. Necessary to train managers. Zero-based budgeting must be clearly understood by managers at various levels to be successfully implemented. Difficult to administer and communicate the budgeting because more managers are involved in the process.
4. In a large organization, the volume of forms may be so large that no one person could read it all. Compressing the information down to a usable size might remove critically important details.
5. Honesty of the managers must be reliable and uniform. Any manager that exaggerates skews the results.

How to create a zero-based budget?

A budget should more or less have the same categories each month, even if you don’t always fill those categories with money. The main types of categories you should have are:

• Income
• Regular expenses, and
• Irregular expenses

Make sure and account for any type of income, not just your paycheck. As an example, my categories under “income” are:

• paycheck
• book advance
• gift received
• blog
• surplus from previous month
• work advance, and
• work reimbursements

Your regular expenses are pretty much what you think of as expenses — utilities, rent or mortgage, groceries, entertainment, and the like. You should also include your allotment for whatever step you’re on — your debt snowball if you’re on step 2; contribution to savings if you’re on step 3.

And don’t forget free spending money. Give yourself a set amount of cash you get to keep in our wallets and spend on whatever we choose. It’s not much money, but it’s enough for a coffee here and there, a magazine when you see one, or whatever. It curbs your appetite for random spending, and it helps you keep to the budget.

It’s important to plan for irregular expenses as well — these are funds that you don’t need each month, but you want to set aside for them regularly so that you have enough cash when you need it. These are also called sinking funds. Some of our family’s sinking funds are:

• books
• Christmas
• clothing
• gifts and holidays
• haircuts
• medical (insurance deductible)
• vacation
• work expenses

Planning Your Budget

If you don’t work from a budget, I encourage you to do so. In a way, you already are, you just may not be aware of it. Your money’s going somewhere; writing it down into a budget form simply allows you to premeditate where it should go. A few tips as you prepare:

• Use a tool that works with your style. A pen and paper might be more your style, but there are budget-tools site in the internet that you can use— it doesn’t really matter.

• Don’t expect it to work perfectly the first time, or at any time. This is an easy mistake, and one that can cause you to think you’re doing something wrong. You’re not. It takes awhile to get the hang of knowing how much money to allot for different line items, and there are plenty of times when your needs change mid-month. Stay flexible.

• Work with your pay periods. If you get paid more than once a month, perhaps it’s easier if you create a different budget for each paycheck, setting aside a percentage for those monthly bills. Do what works for you, so that you’ll do it.

• Don’t be under-specific, but don’t be too specific. It’s easy to have a subcategory for every single need. It’s also easy to generalize. Find a happy medium.

• Account for everything you’re spending, and give it a name. Don’t have a category called “miscellaneous.”

So the next question to consider is – if you were to write a zero-based budget for your family every month, would you keep track of it? Do you just set the paper aside and hope for the best? Do you walk around with it in your purse, analyzing every single number until you’re cross-eyed walking around Target and scared to death of putting anything in your cart?

I encourage you – prepare a zero-based budget as part of your home management every month. And then regularly, enter your expenses to stay on top of how well you are sticking to your budget. As the month progresses, you can see how well – or not so well – it’s working, and tweaks it from there. It doesn’t take much time when you stay on top of it.

This is also infinitely easier to do when you have a smart, simple tool that subtracts expenses from your budget as you record them. I prefer a tool that’s as light and easy-to-use as possible. No bells and whistles that I really don’t need for everyday family finance management. Try the budget tool of Inzolo.com. It’s the simplest way of budgeting your money online.

REFERENCES:

http://en.wikipedia.org/wiki/Zero-based_budgeting

http://www.investopedia.com/terms/z/zbb.asp

http://www.gettingfinancesdone.com/blog/archives/2006/08/how-to-create-a-zero-based-budget/

http://www.accountingformanagement.com/zero_based_budgeting.htm

http://simplemom.net/zero-based-budgets-for-the-home/

http://simplemom.net/the-basics-behind-a-budget-that-works/