Building a Solid Foundation for Financial Management

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There comes a time in the lives of many people when they have difficulty paying their bills. A large portion of today's salaries go toward rent or home mortgages, child care, car payments and all sorts of other bills and financial obligations. Money runs short for many reasons: divorce, wage cuts, unwise purchases, gambling, alcohol or other drug abuse, illness, widowhood, layoffs, inflation. In any money shortage, spending patterns should always be examined first. Extra dollars are wonderful, but they'll soon disappear if you are not sure what’s happening to the money you are already spending. 

Develop a Written Plan for Assessment and Monitoring 

Spending plans that exist only in your head are of little value. A good written plan captures the cash that slips through your fingers every day and directs it to the places it ought to go. Begin by going through your checkbook and credit card statements and writing down where the money goes. Don't overlook the cash you may withhold from your deposit. 

List regular monthly bills like utilities, mortgage or rent, car payments, day care. Next, track variable or intermittent expenses like groceries, clothing, insurance premiums, gasoline, car repairs, tuition, dental bills, contributions, vacations, presents and a host of other possibilities. The more precise and complete the listing, the better. Some things may seem too trivial to bother with, for example, morning coffee or soft drinks at the office, newspapers and video rentals. But, look at it this way: if you saved $5 every day for a year you'd have $1,825. That could pay off a car loan or help you to get rid of a credit card debt. 

Add up the combined total of your monthly spending. Then compare that result with your monthly take-home pay. You may discover that you are better off than you thought. Even if you find that your finances are as bad or worse than you feared, don't panic. That's why you're drawing up a spending plan to put you back in control of your use of money and spending patterns. 

Most of us run into financial hard times on occasion, but if we remain thoughtful and monitor our expenditures through a solid foundation of financial management, things eventually improve. In fact, a financial crisis can bring about improved money management skills that can pave the way to a more secure financial future.