Make A Habit of Saving

The biggest mistake people make with their finances is simply not setting up a household budget. Budgeting is key to preventing overspending and having savings available when needed. It is hard to determine exactly how much money you should be putting into savings. A single person may not need to save as much as a married couple with children. A person who owns their own home will have more expenses than someone who rents.

Despite this, you should be putting at least 5 to 10 percent of your weekly paycheck into a savings account. If your company offers a 401k plan, take advantage of it, especially if they match contributions. These two savings accounts are a great way to start saving for the future.

A Typical Budget

As stated earlier, no two situations are alike. Keeping that in mind, financial advisors suggest everyone creates a household budget following these ideals:

* 2 to 4 for clothing and accessories
* 2 to 8 for medical expenses including insurance
* 4 to 7 for utilities (electricity, phone, cable/satellite, internet)
* 5 to 10 miscellaneous expenses (gifts, entertainment, allowance, vacations)
* 5 to 10 percent for savings
* 6 to 20 for vehicle/transportation expenses (car loans and insurance)
* 15 to 20 for groceries
* 15 to 20 for unsecured debt
* 20 to 30 for housing costs (mortgage, rent, insurances)

Using these guidelines, you can tweak the budget to fit your needs. If you don’t need a car, you can reduce your costs there and put more into savings or paying off unsecured debt. Just make sure you are setting aside money for savings.

Problems With High-Interest Loans

Say you want to purchase a car, but your credit history is less than perfect. The dealership or bank offers you an interest rate of 10 percent, despite the fact that there are zero percent deals out there. The amount you could have saved is tremendous.

Financing $18,000 with a 10 percent interest rate, a five year loan will require payments of $382 a month and close to $5,000 in interest charges. If you qualified for zero percent interest, that same $18,000 would lead to monthly payments of $300 and no interest charges. You’ve saved $5,000.

It’s always smart to find the lowest interest rate possible. Don’t settle for the first offer thrown your way!

Shop Around

Many people opt for the easiest path in life. This is rarely a wise decision. Using the example listed above, imagine you are shopping for a new car. You need something reliable and fuel efficient, so you start looking at dealerships. Why not buy used?

The minute you drive a car off the dealer’s lot, the car has already depreciated. Purchasing a used car enables you to get a better price without sacrificing much. You can get a used car with low mileage and end up saving loads of money.

The same is true with anything. Shop around for better insurance premiums, credit card rates, student loan offers, mortgages and loan interest rates. Never offer the asking price for anything. Always bid low and then raise your offer to the midpoint. Your offer is bound to be rejected on the first try, but the seller has to drop his/her asking price if they really want to get you to buy

Breaking Bad Habits

Impulse purchases are common, yet one of the worst habits. Before purchasing a new pair of shoes, an improved television or a new computer, stop and ask yourself if it is truly necessary. Often, people purchase items intending to pay these items off quickly, but then become financially strapped. They now have to forgo something else to make the payments on their latest purchase.

If you are prone to spending unwisely, cut up your credit cards. Go to stores with a limited amount of cash and leave the checkbook and debit card at home. That ensures you spend only what you can afford.

Make A Habit of Saving

A Typical Budget

Problems With High-Interest Loans

Shop Around

Breaking Bad Habits

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