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Many people find they are spending more than they bring in. It's difficult to increase your net worth (and meet your financial goals) if you are constantly falling behind on the income front. After reviewing the information you entered on the Monthly Budget Worksheet, you might have to ask some hard questions.
For example, are you spending more on entertainment or other nonessential expenses than your income supports? Or are you spending more than you have to for necessities such as housing, an automobile, clothing, or other similar items? The answers will probably point you to one or more possible solutions, such as cutting back on the nonessentials or finding less expensive alternatives. Then, you can put the money you save to work toward meeting your goals.
Most causes of overspending can be addressed through use of a budget. Simply going through the process of putting together an annual budget can help you prioritize expenses and uncover areas where you may be able to free up more money to use for savings and investments.
Many people find that they can develop the discipline needed to put money aside on a regular basis by budgeting for savings and investments the same way they do for other expenses. A good way to make sure your budgeted amounts actually do go into savings and investments is to set up an automatic saving/investing plan with a bank or a mutual fund company.
(Click here to read "Net Worth is the Key.")
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Trimming your Budget
Click here to compare your monthly expenses to averages.
Cutting your expenses will take some effort. You may have to delay some purchases and find ways to spend less on the things that you need to buy. By cutting costs, you should be able to afford to contribute more to your savings and investments. Similarly, if large debt payments are making it difficult to save, you need to look at ways you can reduce this burden so you can move ahead toward your financial goal. Here are some money-saving ideas.
Reduce Housing Costs. One good avenue to explore is the possibility of refinancing your mortgage. The rule of thumb is to consider refinancing your home when mortgage rates drop two percentage points or more below your current rate. But people who plan to remain in their home for a while can come out ahead with a rate reduction of as little as one percentage point. (See When Refinancing Can Make Sense.)
(Click here to read "When Refinancing Can Make Sense.")
Consolidate Debt. Refinancing isn't the only way you can use your home for additional investment funds. If you have high credit card balances, you may want to consider using a home equity loan to pay them off. With high credit card rates, consolidating your debt with a home equity loan could reduce the interest rate you're paying and cut your monthly payments considerably. As an added bonus, the interest you pay on your home equity loan may be tax deductible for federal income-tax purposes, which would increase your savings further.
Buy Smart. How and when you shop can make a discernible difference in your spending. Different items generally go on sale at different times during the year. (See chart.)
(Click here to find out what's on sale and when.)
Review Insurance Costs. Insurance costs can be a major expense. Take a look at your policies and consider these cost-cutting measures: Raising the deductible on your homeowner's or automobile insurance from $250 to $500 could cut your premiums by more than 10%. Consolidating your home and auto policies with the same insurance company may knock another 5% to 15% off your premiums without sacrificing coverage.
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RETURN TO PERSONAL FINANCIAL PLANNING GUIDE TABLE OF CONTENTS.
Go To "Setting Your Goals." | 
