PLANNING FOR A TOUGH YEAR - PART II

CONT'D FROM LAST WEEK

Electricity is another area where rationalizing consumption leads to saving money. Installing energy saving features such as motion detectors in the bedroom will cause the lights to go off when there is no movement in the room. Or using daylight sensors will cause those veranda and outside lights to go off when morning comes, even if you forgot to turn them off when you left for work. At the end of the month you should see the savings in your electricity bill, registered as reduced consumption. This reduced consumption translates to a reduced bill that was made possible because some thought has been given to consumption patterns.

Money saved is Money Earned
If at the end of this month, you have spent less money than you did at the end of last month the difference can be measured as income for next month. This difference can then be lodged into a savings or other investment account (say at your credit union). Or it may be placed towards spending on another critical area.
It may not be possible or likely that you will get a salary increase this month, or that your real income will grow at all, but it is always possible and necessary for money management that you outline your expenses, compare them with your earning and rationally decide on how your money is spent or invested. This process very likely leads to savings or at least a better understanding of the impact of our consumption patterns on our household economy and by extension our national economy.
Here are ten (10) simple steps to help you get there:

STEP 1: Make a List
Make a list of all your debts – credit card payments, loans, car, etc. Make sure to write down even the smallest ones, for example, you may owe a friend $500.00.

STEP 2: Set a Limit
As you’re making your list, write down a maximum dollar limit for each one and set deadlines for clearing your debts. This means, how much you can afford to allocate to each debt at the end of the week /month and when you would like to finish clearing these debts.

STEP 3: Be Realistic
Ask yourself: Is the amount you figured in step 2 really something you can afford? Did you include ongoing expenses like food, transportation, accommodation, and health care?

STEP 4: Prioritize
Pay the most important bills first. Bills such as rent/mortgage, utilities and car loans should be first on your list. While every bill is important, you cannot afford to be thrown out of your home or have your electricity or water service turned off.

STEP 5: Curtail Spending
Revisit the list. Some expenses such as entertainment or eating out can be curtailed. Monitor and limit telephone calls, especially those made to cellular phones.

STEP 6: Stick to your List
This is the toughest part. Stick to your weekly/monthly payment plan until your debts are fully paid. Try not to miss a payment because if you do, it may be difficult to double up the next time around.

STEP 7: Don’t Add to your Debts
Use your debit card if you have one and give your credit cards a break. Make every effort not to take any other loans or add to your existing debts.

STEP 8: Start Saving
Put aside some money for saving so that you will always have something in the bank. (Look at your savings as if it were one of your financial obligations/debts). This way, you will always put aside some funds for savings and resist the urge to delay it.

STEP 9: Communicate
If all else fails and you are unable to keep your head above water, talk with your creditors. Do not ignore their written notices or calls. Answer them promptly by letter, telephone or both if necessary. If you promise to contact someone by a certain date, make sure to keep your promise and contact them, if only to notify them that you are going to make a payment, or explain why there is a delay.

STEP 10: Start Budgeting for Next Year
Believe it or not, now is the time to start preparing for the next year. Take advantage of the time available ahead of you as you plan and prioritize your expenses for next year. Yes as in 2005. If you have plans to build or refurbish your home start planning the supplies you will need and how you are going to source them. Also take advantage of the current post-holiday sales for gifts or supplies, but only if it fits into your budget.

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