08 November 2010

How The Average Consumer Can Save Money

Those who have learned how to manage and save money have a much better chance of staying out of financial trouble than those who do not. Here are a few common sense ways to save money that take very little effort.

Adopt the habit of paying for items with cash. It was about twenty years or so when credit card companies loosened their credit rules. The impetus was to get more people using their cards and building up their balances. The card company then figured it could simply live off the interest. And now, people are using their cards more than ever. And while this is good for the credit card companies and merchants, it is not necessarily good for you. When you pay something with a credit card, you are actually spending borrowed money.

If you happen to have a zero percent interest credit card, then you are in a slightly different situation. You can carry your balance forward for a certain number of months without paying an interest penalty. But, most people are not like that. And, as a result, they end up carrying balances on their credit card for years. And, over the years, all of the interest that they are paying on their balances can really eat away at their savings. If you pay in cash, however, you are never under any delusions as to whether you actually can afford something or not.

Create a budget for your family. The advantages of having a budget are many. But it main benefit is that it allows you to know, at all times, exactly where you are financially. Many people get in trouble with their credit cards and finances simply because they think they have more than they actually do. For example, someone getting paid $10 an hour may actually feel that he has $400 in his pocket after a week of working. But after taxes, FICA, and various other deductions, he may actually only have a little over $300.

The reason for that is simple. At the subconsciously level, the four hundred dollars is still foremost in his mind. As a result, overspending is easy. And it's not until the end of the month where he is wondering where all of his cash went.

Creating a budget for your family is not foolproof. But it does help to prevent scenarios like this. And, studies have conclusively proven that those families who keep budgets are nearly always better off financially than those earning the same amount of money, but do not keep a budget.

Assuming that your family is a typical one, if you were to merely make these two changes to the way you handle your finances, and nothing more, you would be a lot better off financially than most families in the U.S. In the age of quick gratification and lack of personal responsibility, however, the odds of most families doing this is very small indeed.

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