Yes, I know that it’s already the middle of December! However, my experience tells me that most of you have not done your Christmas shopping as of yet. That means that you still have time to ensure that you do not damage your finances during the holiday season.

Here are a few tips to help you keep your Christmas spending in line:

Make a List

Think of all the people that you would like to buy gifts for. This includes all family, friends, and coworkers. Be sure to add in those people with whom you interact with often (pastor/church leaders, kids’ teachers, business associates, etc).

Some of you would even like to include various service providers (mailman, paperboy, hairdresser, barber, etc), go ahead! In the next two steps we’ll decide if you can really keep them there.

Make a Budget

I know that it seems simple, but you must do this. I’m talking about a real budget, not just a random dollar amount that you hope to come under. You need to set a spending limit before you even make your Christmas list!

Take a good look at your finances and determine how much cash you have available to allocate toward Christmas shopping! Do not allow yourself to borrow money just to buy gifts (or for any other reason!).

Make it a point this Christmas to be disciplined and avoid a spending hangover in January!

Set Priorities

Your budget should be based on your financial situation, not on emotion! It would be wonderful if you can get a gift for every person in your life, but that is not realistic.

Begin to look through your list, with budget in hand, and make some cuts. You probably won’t be able to get a gift for everyone on your list, so you need to think through the purpose for each gift, and the type of relationship you have with each person on the list.

Keep in mind that you have a couple of options besides simply purchasing a gift (see below).

Get Creative

For some people on your list, consider giving a homemade gift.

For those who love to bake, you can cross of much of your Christmas list for the cost of basic ingredients! This is even something that you can have your children help you with! They will love the feeling of helping you, coupled with making a gift for someone they know. Just make sure that you are good a baking – don’t just take your word for it !

Being creative when it comes to gift baskets and other artistic projects, can help you stay within your budget as well. This is also true with knitting and other talents that help you create homemade gifts.

To be honest, homemade gifts show a great deal of thought, and usually come across much better than a Gift Certificate or something else that you picked up really quickly.

Since this does involve some costs and a lot of time, a homemade gift isn’t an option for everyone. Despite the push for you to spend money, a Christmas card (with a nice, thoughtful, personal message) is still a nice touch! It can show the recipient that you were thinking of them, and can really go a long way for a small price. This is especially true when you can include a family photo along with the message (and try to have it signed by everyone).

Compare Prices

Once you determine your list to purchase gifts for, start comparing prices. Search online for various options, considering shipping costs and time. Most of the large retailers have robust online stores that allow you to place an order and have it delivered right to the store! Some of them will even gift wrap the item for you and ship it directly to the recipient, with a card that includes a personalized message from you!

You can can look at freeshipping.org to see what online retailers offer free shipping. Keep in mind that December 17, 2010 is “free shipping day“, and over 1200 retailers have signed up to offer free shipping, and will guarantee delivery before Christmas.

Bundle Gifts

No, I don’t mean that you just blindly make relatives share a gift!  But, if you are shopping for a family, try to find a gift that will bless the entire household. The same can be done with children – buying a board game, video game, or child-friendly movie can be a gift for them all.

Since my wife and I have discovered the fun of board games, we love when someone decides to buy us one as a gift. Of course, if they want to buy mea new bluetooth headset and give her the game, I wouldn’t be mad!

But seriously, instead of worrying about spending money on two people, our friends and family can just consider what to buy us as a couple.

Reader Questions:

1. Do you have a budget for Christmas shopping?
   
2. What are some of the things that you do to ensure that you stay within your budget?
3. Have you completed your shopping already?

photo by Jim Robinson Films

4 Tips to Help Organize Your Financial Life

Taking a Saturday afternoon to organize your personal finances, especially when the sun is shining outside or your favorite team is playing on the television, doesn’t exactly sound appealing to most of us.

However, organizing your personal finances is an important project, and once you create an organizational system that you can live with, you’ll be glad that you did.

There are some simple rules of thumb you can follow that are sure to improve your financial management.

Once you have a system in place, paying bills on time, doing your taxes, and saving up for big expenses will be a breeze.

1. Use the KISS principle

“KISS”, in case you haven’t heard of it, stands for “Keep it simple, stupid.”

In other words, while it may be tempting to run to an office supply store and load up on finance software, binders, filing systems, and trays, the more complex your system is, the more difficult it will be to follow.

You don’t need to turn into an organizational dominatrix to manage your finances; you just need to be “organized enough”.

Tax-related receipts, for example, might all get dropped into a big manilla envelope taped to the side of your desk. The simpler your organizational system, the more likely you’ll be to stick with it.

2. Take advantage of online banking

Most banks these days offer free online banking and online bill pay. If your bank doesn’t, it might be time to switch to one that does. Online bill pay allows you to set up all your recurring payments, and then forget about them.

You can set email notifications that tell you when the bill is about to be paid, when a final bill is paid, and so forth. You can even save a few trees by having your monthly statement delivered online rather than through snail mail.

3. Where does your money go, anyway?

At Debtors Anonymous, the first thing you are told to do is write down every penny you spend. If you make a car payment, write it down. If you buy a candy bar, write that down, too. The truth is, most people don’t really know where their money goes to.

In order to organize your finances so that you can create a budget, start to save, or pay down debt, your first task is to find out where your money is currently going. You don’t need to be complicated about tracking your spending. A pocket-sized notebook and a pen will do fine.

At the end of the month, examine what you’ve written down. You might be surprised at what you discover about your spending.

4. Create a budget

Once you have a logical, KISS filing system, you’ve set up automatic payments to take care of paying your bills on time, and you know what you’re currently spending, you’re ready to create a budget.

You can use a budgeting spreadsheet, software, or even a pencil and paper, but a budget is essential to having and organized financial life.

A budget is the cornerstone of any personal financial organization, but for many people, starting a budget is a lot like starting a diet. You begin with grand expectations, only to find yourself sneaking into the fridge, or caving in when the waitress asks if you want dessert.

In order to stick with a diet, two crucial components have to be a part of your plan: first, your diet is realistic. Second, you have a specific goal you’re inspired to achieve, such as fitting into a wedding dress or preparing for an athletic competition.

Budgets are the same way. In order to stick with them, you need to be realistic, and you need to be inspired. If you currently spend $150 per month eating out, for example, telling yourself you’ll only spend $40 per month eating out is unrealistic.

Start by packing yourself a lunch a few times per week, then gradually work your way down. Similarly, find a reason that inspires you to stick with your budget, such saving up to take a dream vacation or getting a new car. Remind yourself frequently of your inspiring reason to stick with the plan, and you’ll be much more likely to keep it.

Although taking the time to organize your finances in the four ways mentioned above may not be nearly as fun as watching a football game, once you’ve done it, you’ll feel relieved and proud of yourself – and you’ll be on your way to improved and stable personal finances.

This article is from Bob who runs ChristianPF – a personal finance blog dedicated to helping Christians become better stewards of what God has provided.

I talked with someone recently who mentioned they decided to sit down and have a look at their finances.

It seemed they were just not getting ahead, but didn’t know why.  They asked themselves the question that we’ve all asked plenty of times:

“Where is all my money going?”

After sitting down and taking a look at their financial statements, they realized something.  There, right before their eyes, black and white and plain as could be – they found the culprit.

They realized they were spending a ton of money on going out to eat! 

It didn’t seem like it throughout the month.  A dinner here – out with friends for a bite there, but it all added up.

We all do this with our money management don’t we?  We do really well with our financial budgeting for a while and then all of  a sudden we realize we aren’t doing quite as well as we should be.

Let’s take a look at why regular reviews are essential to reaching our goals:

We Often Go Astray

It’s in our nature to slack on anything that takes hard work and discipline.

Whether it’s diet and exercise, spending less than you make, saving more money or personal budgeting - it really doesn’t matter what it is – the truth is that it’s difficult to maintain consistent discipline.

We go astray.  We make dumb mistakes.  We splurge here, spend a little more than we should there.  It’s natural. 

Every so often, we need to do a check-up. 

We need to recalibrate back to what we should be doing. 

Take your personal budget and sit down to see how far off you are when it comes to your money management.

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We Think We Know, But We Don’t Know

This is easy to do as well.  Life is busy.  So we just continue doing what we are doing and in our minds we think we’ve got a good handle on where our money is going and what we need to watch out for with our personal budgeting.

But do we really know?  If we were honest we’d admit that there are times when we think we know what’s going on with our finances, but we really don’t know.

That’s why some of us are so surprised when we sit down and perform a money management check-up.  We see the numbers staring us in the face.  There is no denying the truth of those numbers.

After a while of being on cruise control, we think we know how much we are spending and how we are doing, but we really don’t know.

The One Constant

Lastly, the one thing we can always count on in our money management and personal budgeting is change.

This is the one constant right?  Things are constantly changing.

Maybe you are making less money – or hopefully more.  Maybe you had a change to your situation, like having a baby or getting a promotion.

And don’t forget, expenses are always changing – usually they are going up – and that always affects the budget.

That means regular check-ups are not only a good idea, they are essential to getting ahead and staying ahead financially.

Don’t set it and forget it.  Don’t put your personal budgeting on cruise control. 

Instead, be proactive.  Be on top of the game.  Be ready for changes and be ready to adapt.

What Are Your Thoughts?

It’s easy to go astray.  It’s also much easier to assume we know where our money is going than taking the time and energy to sit down and take a realistic look at our personal budgeting.

It’s also easy not to change the budget even though things around us are changing constantly.

So, perform regular reviews of your personal budget and keep your money management in good shape!

How often do you do personal budgeting reviews or check-ups? 

Sometimes it feels like we’re moving at a snail’s pace when it comes to getting ahead doesn’t it?  I mean, if things could just change over night it’d be so much better – but it doesn’t. 

This is where financial budgeting comes in!

Besides life insurance, financial budgeting is one of the only other personal finance topics that makes peoples’ skin crawl! 

It sounds so constricting, so enslaving and many people feel a financial budget will sap their freedom! 

But, I’m here to tell you from my own personal experience as well as experience working with others that financial budgeting is one of the most liberating things you can do with your money!

Why?

Because when you know exactly what you can spend without having to worry about sending yourself down a debt spiral, you can spend without guilt, without remorse and with a lot more happiness!

My wife and I recently reworked our financial budget and it was good to put some checks and balances into what we were spending.

We realized that we were spending waaaay to much on going out to eat so we put a cap on it and last month was a great month! 

We enjoyed our going-out-for-dinner-times and when we reached out limit we stopped! 

We both felt great about it! 

So how can we get back on track and stay on track with our financial budgeting?  Take a look at these ideas:

Make Financial Budgeting a Family Affair

When everyone is working together toward the same goal you are more likely to stay on track.  It’s so difficult if you have one spouse who is gung-ho for saving, budgeting and getting out of debt and the other one is not on board!

Check Your Budgeting Progress Regularly

Ideally once a month you should sit down and review how you did and make any adjustments as necessary.  

You may have budgeted $300 monthly for groceries, but you find after a few months it isn’t realistic.  It’s OK.  Make your adjustments by increasing your budget in some places and reducing it in others!

Make Financial Budgeting a Lifestyle

Think of financial budgeting as lifestyle, not just some crash diet!  Make it part of your life and with some discipline you will reap rewards. 

Once you build your budget into your lifestyle it will soon become an effective habit that will transform the way you handle money and help you get on your path to saving in a Roth IRA or other retirement accounts!

Start Budgeting at the Right Time

This one is so key!  Don’t start when you know it will be difficult (e.g, right before the holidays or before a major vacation that was already planned).

This would be like starting a diet the day before Thanksgiving!  You have to get the timing right in order to stay motivated.

Take a Look at Financial Budgeting Software to Help

Find a budgeting system that fits your needs -  budgeting software like Mint.com can be a very useful tool.  There are plenty of others out their like Budget Pulse or Quicken or Gazelle Budget

Automating  often makes it easier to stay on track.

Build Rewards into Your Budget

This is another big one.  The reason so many people hate to budget is because they often cut out all the fun stuff!  Keep fun stuff in there and make it a reward system. 

For example, if you stay on track over the next two weeks you get to go out to eat at your favorite restaurant.  Or – if you spend less than your budget this month you get to go buy a new outfit. 

Build that into your budget and you’ll be motivated to make a game of it and stay on track!

What Advice Would You Give About Financial Budgeting?

Got any tips to share?  Let us know in the comments below!

Tom and Sue had some great financial goals in mind.  They wanted to start saving for the girls college education, but weren’t sure what kind of account to use. 

“There’s so many choices, I’d like to do some more research before I sign up for something.  I want to make sure we’re using the right account.  After all, this is for my baby girls.” Tom told Sue affectionately. 

They also wanted to start maxing out Tom’s 401k at work, but haven’t gotten around to it.

“Did you increase your contributions to your 401k yet Tom?”   “No, I wanted to wait to see what kind of expenses we had coming up with birthdays and our anniversary right around the corner.  I wanted to take you out to that new Italian place that just opened up to celebrate” Tom responded.   “That place is expensive isn’t it?”  “Yeah, but it’s our anniversary, it’s OK to spend a little on a special day like that”. 

They set a goal to establish Roth IRAs this year too, but haven’t been able to find the money to fund it. 

“Sue, did you run the numbers on the budget yet to determine if we can get those Roths going?”  asked Tom.  “No, I haven’t had time.  I’ve been so busy with the girls and plus if we are going to take that cruise this year I just don’t think we’ll have any extra money.  I guess we could just put the cruise on the credit card as long as we pay it back right away.”

“How much do we have saved for the cruise?” asked Tom.  “Right now we have about $100 that we just put into savings” Sue responded.  “Where did all the rest of it go?” asked Tom with an agitated tone.

“Are you kidding me?  You’re looking right at what happened to it!” Sue said sharply.  Tom gazed at his brand new 50 inch Plasma TV.  “The ’12 months same as cash deal’ was coming due and I didn’t want to pay the interest so I took the money from our savings account to pay it off.”   Tom felt a twinge of guilt, “but that HD sure is sweet”, he thought.

“We really got to start tightening our belts and get our finances in order” Tom said.  “I know, but every time we try it seems like something else comes up” Sue responded. 

There’s Always Something

Have you ever felt that way?  Every time you start getting your finances in order something else comes up?  This is true for all of us.  There is always something else to take away our time, energy and money.  The difference between those who actually reach their goals and those who don’t is discipline. 

Let’s face it, working at our finances is usually hard work and often not that fun.  Taking a realistic look at your expenses, developing a budget and researching where you should be saving your money requires effort.  For some of us it requires a lot of effort!  It’s often tempting to allow ourselves to be distracted by the things we’d rather be doing than the things we know we should be doing. 

Least Resistance

This is known as the path of least resistance.  Wikipedia describes it this way: “The physical or metaphorical pathway that provides the least resistance to forward motion by a given object or entity, among a set of alternative paths”  We could say it’s why certain objects or people choose the paths they do. 

Water takes the easiest path downhill as it’s pulled by gravity; storms follow zones of low barometric pressure that offer less opposition; and humans often take the easy way out than rather than fight through difficult circumstances, temptations or trials to accomplish goals or tasks. 

It’s ironic from a human standpoint though isn’t it?  Think about the times you felt most proud of yourself.  Isn’t it usually when you disciplined yourself to do something difficult and came through on the other end having accomplished it?  We get the most satisfaction from doing the hard things, but often times we don’t do the hard things because, well, they’re hard.

Avoiding That Path

So how do we avoid taking the easy way out and truly change our habits so we can accomplish the tough financial goals we’d like to get done?  Here are some simple strategies to get you thinking.

Work As a Team

If you are married, it is extremely important that  both of your are on the same page when it comes to your money.  Husbands, as the servant leader, you need to step up and cast the vision and provide the direction for where you want your family to go in terms of your finances.

Start With a Small Step

Radically changing your money habits won’t happen overnight, but begins by taking some “baby steps” as Dave Ramsey often says.  Instead of going out for lunch five days a week, pack a lunch for one day and save that money. 

Do Hard Things First

This is easier said than done, but rather than saying you’ll start that budget next month, start it today.  It’s easy to procrastinate on the things you don’t want to do.  Giving and saving are things you have to be intentional about, otherwise those are the things that are easy to push back until you “have the money”

Stop Making Excuses

Let’s be honest, most of us can make some sacrifices and save a little more, pay down a little more debt, be more generous and get our finances in order, but we just don’t –  for a million different reasons.  We need to recognize the excuses and work at killing them!

Review Direction Regularly

Charting the course to financial freedom is never a straight path.  It requires regular review and adjustments.  Oftentimes you’ll find yourself cruising along with some new goals you’ve established only to find those bad habits creeping back in.

What About You?

Avoiding the path of least resistance takes hard work and a motivated effort.  With some discipline, you can get on track towards achieving your financial goals.  You’ll feel so much better about yourself and your situation when you stop taking this path, lay down the excuses and start doing the hard things. 

Have you taken any difficult steps to get off the path of least resistance?  What were some of the sarifices you’ve made to help get you started in the right direction?  What were some of the biggest excuses you made (or are making) that kept you from getting ahead financially?

Financial difficulties like recessions, job layoffs or reduced salaries have a way of revealing how important it is to build a financial safety net.

Having funds available for emergencies helps weather the inevitable storms of life and can get you through some difficult circumstances without incurring credit card debt.

Here are some things to consider when establishing your emergency fund.

How much is enough?

Generally speaking, most financial advisors will recommend you have at least three to six months worth of expenses in a cash reserve.

Depending on your situation you may want more.  For example, if you have a commission-only job and your income fluctuates or you have a seasonal job where your income is low for a few months out of the year it might be wise for you to establish a larger net.

How do I begin establishing a cash reserve?

If you find your reserves are a little anemic, consider these steps to start the process:

1. Take inventory of your monthly expenses.  Multiply this number by your desired reserve (i.e. 3 months, 6 months etc)
2. Make a budget so you can begin to “trim the fat”.  Cutting back on unnecessary expenses will free up extra cash that can be saved into your reserve.
3. Get creative on making additional money.  Sell your old “junk” on ebay, or have a garage sale.  Use these proceeds to start building your emergency fund.  My wife and I have made some extra money these last few years by selling our old cell phones, clothes and more on ebay.
4. Save aggressively into a savings account.  There are many great accounts out there.  Bob at ChristianPF has a post on the 10 reasons why he loves ING.  If you like using local banks, I suggest calling around to find out who is offering the highest interest.  Otherwise if you are comfortable with online banking then check out bankrate.com.  They allow you to search the highest yields at banks both locally and nationally.
5. Don’t dip into your reserve unless absolutely necessary.  One of the biggest mistakes people make in setting up cash reserves is a false sense of now “having money to spend”.  Stay focused on the task at hand.  After you’ve built up your cash reserve feel free to reward yourself.  Just remember this money is for a safety net.

I built up my cash reserves – now what?

Once you’ve reached your goal for your cash reserve it’s time to get strategic about earning the most interest.

I usually recommend a Three Tier Cash Reserve System to help keep the funds liquid and yet earn a higher rate of return.

A three tier cash reserve basically utilizes a checking account, a money market and a short term CD Ladder.

Tier 1

Tier 1 consists of your checking account.  It acts as your revolving door, meaning  funds come in and go out on a regular basis.

Since most checking accounts pay nothing, you want to keep no more than one months worth of expenses here.

Tier 2

A money market fund is designed to provide a safe place to invest short term liquid assets.  They typically generate a higher interest rate than a savings account.

If you are using a three month reserve you’ll want to keep about a months worth of expenses here and about two to three months worth if using a six month reserve.

Tier 3

A short term CD Ladder is essentially a 12-month CD bought each quarter or four total.  Divide the remaining amount of your reserve by four and buy a 12-month CD.  In three months do the same thing and so on.  Remember to always look around the best best CD Rates before you make any final decision.

If you fast forward one year from now, you will have a CD coming due every three months in case of a major emergency and need to access the funds.

Theses ladders can be structured in various ways.  For example, you could buy a 3, 6, 9, & 12-month CD all at once if your bank offers those terms.  You could also buy 12, 24, & 36-month CDs to ladder your funds.  I am a big fan of the 12-month CDs for two reasons:

1. They typically offer higher interest than the shorter term CDs
2. You don’t have to lock up your money for a longer time period.  Since this is a saftey net, you don’t want to be in a position where you are cashing out a longer-term CD early and incurring a penalty or forgoing interest.

Set Targets and Avoid Discouragment

Don’t be discouraged if you are not able to get your cash reserve set up like this yet.  The key is to stay focused on saving your money so that you can get your emergency fund where it needs to be.

Set a target for yourself of when you’d like to achieve this goal and also set little goals along the way (i.e. saving your first $1,000, getting Tier 2 set up etc.).

Be sure to reward yourself along the way when your goals are met so that you can stay motivated and positive.

Saving for Emergencies or Paying Down Debt

Inevitably a question will come up from time to time about whether it is smarter to save into an emergency fund or pay down credit card debt?

I like Dave Ramsey’s “Baby Steps” idea when faced with a question like this.  What he usually recommends is that you save $1,000 into an emergency fund first and then start paying down your debt.

You can worry about building up your Three-Tier Cash Reserve once you have your debt wiped out.

Resources To Help

• Bankrate.com - compare interest rates on savings, money markets and CDs from banks across the nation.
• Dave Ramsey’s Baby Steps

Your debt may be costing you more than you realize especially if you are making these 5 mistakes.  Paying off your debt is a battle you can win by bypassing these blunders:

1. Not paying the bill in full each month

This is where it all begins.  You buy something you can’t afford and think to yourself, “I get paid in two weeks, I’ll just put it on the credit card and as soon as I get the bill I will pay it off” and then something else comes up.  Your brakes go out, your washer quits working  or you find some other trinket you want to buy and you put that on your credit card too.  At the end of the of the month you receive a hefty bill and only pay what you can and wind up leaving a balance on the card that accrues interest at insane amounts. Creating a budget will go a long way in helping to avoid this problem.

2. Only paying the minimum payment

If you are paying only minimum payments on your debt, your credit card companies love you and you should be getting Christmas cards from them each year.  Paying the minimum payment will basically ensure that it will take a lifetime to pay off your debt.  You must pay more than the minimum if you want to get anywhere with your bills.

3. Not paying attention to due dates

This is easy to do because we are busy people, but making a late payment even if it is only by a few days can rack up ridiculous charges that only compound your debt.  Those annoying charges can also have an impact on your credit report.  Being vigilant about paying your debt and paying it on time is key.

4. Not paying attention to the interest paid

If more people understood how much interest they are paying to their card companies each month in interest alone, perhaps they would make a greater effort in getting these debts paid off.  Matt Jabs at DebtFreeAdventure.com takes a revealing look at his own interest payments for the month and shows how interest destroys your ability to build wealth.

5. Not negotiating with the card companies

It puzzles me that more people don’t call their card companies to negotiate with them.  You can negotiate things like interest rates, late payment fees or even payment plans.  If nothing else, it doesn’t hurt to give them a call and find out what they can do for you.  Bob Lotich at ChristianPF.com tells about his experience in  negotiating with credit card companies. 

Getting out of debt isn’t easy, but don’t make it harder on yourself by making simple mistakes that can easily be avoided. 

Few things can make people’s skin crawl like the idea of creating budgets. If you are unsure where your money goes each month or wonder why you never seem to get ahead, a budget might be a good tool for you.

Budgets conjur up feelings of kissing your freedom and your fun goodbye, and some people even try to mask the feelings by calling it a spending plan.

Ironically, many people find budgeting a highly liberating experience. A budget, sorry – spending plan, can be a great tool to help control your money instead of your money controlling you.

What many find after creating and sticking to budgets is they have more money to spend on discretionary items and can have fun without the guilty feelings.

I’d like to provide some simple and practical ideas on how to make a budget and tips on sticking to it.

Creating a Budget: Where Are You Now?

The best place to start in creating a spending plan is to find out where you are. When you Mapquest directions you always need a starting address. It’s the same idea with financial planning. Getting an idea of where you are is an eye-opening experience for many people. To me, the best way to figure out where you are is to do a 30-day diary of expenses. It takes a little more time up front, but I feel it reaps big rewards.

Write down every single dollar you spend in a month whether it’s coffee at the gas station or lunch at a local restaurant. After 30 days of doing this you will get a pretty good idea of what unnecessary expenses you might be able to cut out.

Next, list out the categories of each expense (i.e. gas, food, clothing etc.), jot down the amount in each category and determine if those numbers are realistic. For example, you may find that you spent $75 that month on lunches, but by making your own lunch once or twice a week you feel you can get that down to $50. Use that number for your plan and do this for each category.

Creating a Budget: Where Are You Going?

The next step is to figure out where you want to go financially. What I mean is consider what goals you want to plan for. You may have a goal to give more of your money to charity or to save for your child’s education or your own retirement. List out each goal so that you know what you’d like your money to do for you. This doesn’t mean you will be able to save for each goal, but listing them on paper is a powerful and motivating tool.

It’s important to remember that these items must come out first, otherwise you and I both know that if you wait to see how much is left over and then try to give or save it probably won’t happen.

Creating a Budget: How Do You Get There

Once you’ve determined where you are and where you want to go the next step is to put some numbers down. Write down all of your expenses and the alloted amounts or targeted numbers for discretionary items like going out to eat. One of the reasons budgeting becomes such drudgery for many people is that they don’t plan for fun things. Bob at ChristianPF.com has a good post about how budgeting should be like making cookies.

Michelle Jones, editor of BetterBudgeting.com, has personally reviewed and recommends several budgeting tools to help get you started. She says these budget tools “can be extremely useful and will help you stay on track year after year, but the most important thing is that you find something that works well for you and your family.”

Once you’ve outlined your alloted expenditures, factoring in your savings and giving the hard part is sticking to the plan. Review it often and make adjustments as necessary. Remember, the budget is meant as a tool for you to control your money so don’t let the budget control you. Be flexible when needed, factor in the fun things and persevere.

Creating a Budget: Staying On Track

Here are some general tips to staying on track:

• Make it a family affair.  When everyone is working together toward the same goal you are more likely to stay on track. 
• Check your progress regularly.  Ideally once a month you should sit down and review how you did and make any adjustments as necessary.  You may have budgeted $100 monthly for gas, but you find after a few months it isn’t realistic.  It’s OK.  Make your adjustments and determine where you might be able to cut back. 
• Make it a lifestyle.  You’ve heard people talk about this with food: “it’s not a diet it’s a lifestyle”.  The same can be said for budgeting.  Make it part of your life and with some discipline you will reap rewards. 
• Start at the right time.  Don’t start when you know it will be difficult (e.g, right before the holidays or before a major vacation that was already planned)
• Find a budgeting system that fits your needs (e.g., budgeting software)
• Build rewards into your budget (e.g., eat out every other week)
• Try to avoid using credit cards to pay for everyday expenses.  Using credit cards makes it more difficult to track your expenses.  After you get the hang of your budget and have been sticking to it, you may feel comfortable enough to start using them again, but remember to pay off your balances in full each month.  

Practical Advice to Pay Off Credit Card Debt

According to creditcards.com, the average American household credit card debt is surveyed to be at $8,329.

Even if you are not one of the average ones you probably know the devastating affects debt can have on you and your family.

If you are burdened by credit card debt and are serious about breaking free from the bondage that credit cards can put you under, then let me offer some practical steps to pay off credit card debt and begin your journey.

1. Pray About Your Situation

Prayer is an essential component for any aspect of our lives.

If you are in over your head in credit card debt, might I suggest humbling yourself and spending some quiet time alone with God to be honest with him about where you are at financially. He’s not going to be shocked by the news and He offers wisdom to those who ask for it (James 1:5).

2. Take Inventory of Your Credit Card Debt

Paying off your credit card debt requires that you gather each credit card statement and write down the name of the card, the balance, interest rate, minimum payment due and the amount you are currently paying toward that debt.

I would also suggest you write down the toll free number of the card company as this will come in handy later.

Taking inventory also means you look carefully at each card companies offers (i.e. balance transfer rates, 0% offers etc.) This will be important in step four.

If you are married this should be done with your spouse. You would be amazed at how many couples I come across that do not know that the other one has credit card debt or are unaware at how bad the problem is.

Typically one spouse is more of a spender than the other and so it can be quite a shock at first, but paying off debt is a team sport and must be fought together.

3. Stop Over-Spending So You Can Pay Off Credit Card Debt

This sounds pretty basic, but if you are in credit card debt you have been spending more than you earn.

You must be tenacious in reducing expenses and stopping your use of credit cards in order to fight this battle. Christian Personal Finance has a great post on where and how to cut expenses.

4. Negotiate Your Credit Card Debt With the Card Company

I am amazed at how often this is overlooked.

Many companies are willing to work with you if you approach them and let them know that you are wanting to pay off your debt, especially in this economy, where many people are not paying their bills or even filing for bankruptcy.

I suggest calling your card company and be honest with them. I would ask for a manager right away or an account closing specialist so that you get straight to the decision maker that can help you.

Let them know you want to pay down the debt and you’d like to know if they can reduce the interest rate for you. Find out if they have any special balance transfer rates and that you may be willing to consolidate some of the debt to them if they can give you a decent offer.

Also let them know that you are willing to transfer their balance to another company if they cannot work with you. Here is a helpful post about negotiating with credit card companies.

5. Consolidate to Pay Off Credit Card Debt

If possible, take advantage of special balance transfers offers.

This only works if you stop your over-spending. You don’t want to consolidate your debt and then rack up another couple thousand dollars on the card you just transferred.

You don’t want to get into the habit of doing this either because it can have some negative impacts on your credit score, however, if you consolidate some of the debt to a much lower interest rate then more of your payment will go towards paying off the principal.

6. Snowball Your Way to Paying Off Your Credit Card Debt

Some people believe you should pay off your highest interst card first. I tend to disagree. I think snowballing your debt is more of a confidence builder and can start the momentum towards getting you out of debt.

According to Dave Ramsey the best way to knock out debt is to get some quick wins under your belt.

” The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.”

The first step in snowballing your debt is to pay minimum payments on all your credit cards except the one with the lowest balance.

You pay as much as you can on that amount until that debt is gone and then you take whatever that payment was and apply that towards the next smallest balance.

Each time you pay off a debt, apply that payment to the next smallest card and before you know it you will have created some great momentum and will see the progression at a more rapid pace.

Final Thoughts on Paying Off Credit Card Debt

Paying off credit card debt is not easy and it won’t happen over night. It will take discipline, sacrifice and patience, but the results will be worthwhile.

Find some friends to keep you accountable and do your best to keep plugging away. You’ll be glad you did.