The Art of Savvy Budgeting

Before you can invest, you must figure out how to keep track of your cash

to the store a day or two late? Get them back on time and stop paying late fees; it’s money down the drain.

  • Pay yourself first. This is advice we’ve touted for years, but it’s important if you want to have money to put away for investments.
  • “Set aside $50 to $100 a month, and do that before you pay any of your other bills,” says George Stewart, a CPA in private practice in Seattle. If you pay your bills first, “typically you don’t have anything left over” to put aside, he warns. Set up direct deposit so that money goes straight from your paycheck into your 401(k) plan or your individual retirement account (IRA).
  • Develop a long-range financial plan. There are four objectives you should be trying to achieve to execute an effective lifelong financial plan, says Stewart, and you should work on them all simultaneously. (1) Try to accumulate three to six months’ worth of living expenses; (2) buy a house; (3) start an investment fund; and (4) max out your 401(k) or other retirement plan.
  • Be a creative discounter. Perry-Mason also recommends finding ways to enjoy entertainment like going to the movies or concerts by getting a discount. She suggests serving as an usher at a concert to get in at a reduced price.
  • Another money-saving tip: sell your old clothes. “I clean out my closet once a year and sell my old clothes” to consignment shops, stores that buy and sell used clothing, she says.

    CREDIT

    • Making sure you have good credit. yes, there are positive aspects to using credit cards. Having good credit and benefiting from some of the advantages of using credit cards are important keys to staying out of debt.
    • Pay your bills on time all the time. To avoid going in-to hock, keep your debt slate clean. “The best thing people can do [to maintain good credit] is to pay their bills on time and pay them early,” says Steve Rhode, president and co-founder of Debt Counselors, a debt-counseling service based in Rockville, Maryland.
    • Rhode notes that with companies shortening their grace periods, it makes more sense than ever for consumers to pay all their bills in a timely fashion.
    • Use credit cards wisely. Experts point out that consumers use credit cards the wrong way, running up big balances they’re unable to pay off quickly. That harms your ability to build wealth, not to mention the damage it does to your credit history. “You should have three cards, at maximum. Those are the only cards you need,” says Luther Gatling, president and co-founder of Budget and Credit Counseling Services (BUCCS) in New York City. He recommends you have three different types of cards: one you pay back in 30 days, a revolving card and a debit card.

    There are several warning signs that indicate you’re not using your credit cards properly. If you’re only able to pay the monthly minimum, if you have to borrow from family and friends to make payments or if you have to take cash advances from your

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