A recent report by CBS news revealed that the average American household is over 7,000 dollars in credit card debt. However, following the five tips below will help households climb out of debt and become financially free.
Prioritization
Almost all household budgets are based on three fundamental costs: food, housing and transportation. In fact, these expenses typically account for 50 to 60 percent of the bread winner’s salary. Therefore, households should analyze and streamline their three basic expenses. There are ample opportunities for saving money when shopping for food. For example, households can save money through print and online coupons, discounts and rebates. While housing prices are going up, households should focus on paying off their mortgage as soon as possible. Finally, investing in a fuel efficient vehicle is an excellent way to save money in the long run. After these three major expenses, households tend to spend money on entertainment, clothes and other household items. However, learning to delay self-gratification is important for financial success.
Don’t Eat the Marshmallow
Joachim de Posada is a famous business coach who wrote a book entitled “Don’t Eat the Marshmallow.” The gist of the book is that delayed gratification is a key to personal and business success. To illustrate, a classic psychology experiment offered children the opportunity to either immediately receive one marshmallow, or wait and be rewarded with two marshmallows. Follow-up research on the participants as adults revealed that the children who had resisted the initial temptation of accepting the single marshmallow later experienced more success and happiness in life. Research has shown that there is a very high correlation between delayed self-gratification and maturity, responsibility and self-control. Therefore, budget planners must focus on incorporating delayed self-gratification into their budget planning and management.
Take Advantage of Technology
Most people struggle to perform the advanced math needed to successfully monitor and balance a budget. However, there are many technology solutions that will help people budget their annual income throughout the year. First, there are many apps available for smart devices that can help users track and trend their personal expenses. Next, there are many web-based tools that offer excellent tools that will analyze and provide feedback of personal financial information. Finally, there are simple spreadsheets that people can use to track and trend their budget. For example, anyone can download a budget spreadsheet template off the Internet and use it to document their spending habits, create personalized categories and monitor their financial health.
Time Management
When it comes to budgeting, many people focus on a month-to-month budget. However, financial experts recommend budgeting for the year because this will provide a holistically accurate financial plan. In this way, households can actually plan on which major purchases they will make throughout the year. This will provide ample time to research and wait for the best deal. It will also provide plenty of time to clearly consider if the item is actually necessary at all. Keep in mind that time management is an excellent way to improve your sense of delayed self-gratification. Finally, be sure to set aside time every week and month to review spending habits and make any necessary adjustments.
Reward Yourself
After you have mastered self-control, it is very important to reward yourself for all your efforts and sacrifice. Keep in mind that strict diets tend to backfire because they focus too much on denial. Therefore, occasionally rewards will empower and encourage the budget planner to continue their hard work. For example, research clearly shows that people enjoy leisure activities not just because they are fun, but because they spend it with other people. Therefore, be sure to treat yourself and a friend or a family member to a movie, dinner or other leisure activity.
In the end, learning how to manage your annual budget will save you money and time in the long run. In order to accomplish this, it’s important to know how to prioritize, delay self-gratification and use technology. It is also helpful to properly manage time and regularly reward yourself.
No comments:
Post a Comment