Managing your Finances & Middle-Class Financing

By: S. Michael Windsor

As it is quickly becoming known, the middle-class is having a much harder time making ends meet than the generation before us. Why is this? Many goods have gotten cheaper, but many of our other expenses have gotten much more costly. Here are some tips to help keep things under control. First, if you are a couple, the best thing to do is to have a discussion with each other regarding your individual spending habits. Not an argument, but a conversation. A plan needs to be made and both sides will have to be on the same page as the other in regards to the dreaded expense issues. It should be decided up front what percentages of the total income should be divided up for such things as retirement (10%), short-term expenses (such as unexpected repairs) (5%), taxes (25%), car payments (10%), mortgage/rent (25%), and quite costly and most scandalous miscellaneous expenses (25%).
By having a ready and set model by which to allocate your expenses, things will seem to run much more smoothly in regards to the old 'cost creep'. If a person was to compare this model to what their spending today, they will in many cases see quite a difference, especially in the home payments area. Many families do end up paying more for a home just to be in an excellent area for their children's schooling and such. This is a wonderful thing to do, but if you cannot afford the home then why risk losing it altogether? Downsizing, even in the same area, seems to be a smart choice. A friend of mine who has been doing well in business these days has already been approaching this idea and is currently in the process of moving into a smaller home due to the shifts in the economy.

This will save them from losing it all and will continue to prosper once they get things back in order and lower those monthly mortgage payments. Another thing to consider would be renting even in the same area. This could save you the burden of the mortgage while you have more time to put more of that 15% savings (both for long term and short term) away.
The important thing about surviving this current 'storm' in our economy is simply being able to recognize when you are in an unstable place financially. You know the gut feeling. Yes, the one that keeps you quietly staring off into space at the dinner table and at the ceiling at night. Why not possibly follow that gut feeling and start really opening up the books and have a conversation with both yourself and your other half before it really takes a hold on everyone? You can start lowering costs by looking at insurance plans and possibly raising the deductibles. This has really been effective in many cases as it lowers the monthly payment with many people. Speaking of monthly payments other than mortgages, the other expense that really gets to all of us is the inevitable car payments.
Car payments are some of the most expensive and largest percentages of our incomes yet we still pay for that brand new vehicle. Why? I am actually still trying to figure that out, but in the meantime, I have actually just gone to a less expensive brand new car where I am able to pay months ahead of time and not having the big burdens of those big payments and interest. Some tips here may be, other than a lesser expensive vehicle (such as the Nissan Altima or Toyota/Scion series of vehicles), maybe consider just one vehicle versus two brand new cars? Remember, those interest rates are where the car dealers make so much money, in addition to car sales, of course. So maybe consider even getting something much cheaper that you could even find a way to finance yourself? I am sure there are far better rates out there that you can find through other banks and loan sources. Credit cards are that major thing that really seem to know how to keep our tensions high. So why do we use them? They are so easy to use. One simple payment, and done. However, that monthly payment can really be quite a traumatic sight at first glance many times.
Putting more focus on simply spending cash would be a great idea for those who have the 'cost creep' problem reoccurring on a regular basis. By using cash often, you will see just how much you are spending and maybe it will help settle in the fact that knowing how much you spend is how you really 'save' money and build wealth. So if there is one thing to remember, take in the idea of really setting up a model similar to the ever-popular one mentioned at the beginning of this article. Really let one such as that settle in and follow it with discipline. If you don't follow any sort of plan, you will surely fall into a financial setback that may cost you more than just a home, but years of making up to do with everyone involved. Take a step forward, if you haven't already, and take a look at your situation and have that talk with your loved one. It may very well be one of the best talks you have had in a very long time.

Finance
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