Is it an Income Problem..... or a Spending Problem?

by Janice Forostiak, Marketing Department

I had lunch with a friend recently, and was forced to listen for the 100th time about how little money she has leftover at the end of the month. I felt some sympathy, and yet . . . in the course of our conversation, I got a peek into her spending habits when she told me how often she goes out to eat, goes to the movies, etc. etc.

Not to begrudge anyone's personal frills, but these things add up if you’re not watching how often or how much you spend. Suddenly, a movie a week plus going out twice a week adds up to “I can’t make ends meet” or worse, “I can’t pay the mortgage.” What do you do? Get a second job? Go into debt? Not so fast. Maybe it’s a good time to examine where all your money is going and make a budget. MSN Money offers some guidelines to uncovering the problem. Then, Signal Financial can help you with the answers.

Some money myths, busted by our friends at MSN Money:

1. You Don’t Have Enough Money to Follow a Budget
No matter how much — or how little — money you have, it’s always important to be financially responsible. It’s impossible to keep track of your funds if you don’t know where they’re going. Following a budget helps you monitor your finances regardless of the amount of money in your account.

2. It’s Cheaper to Eat Fast Food Than Buy Groceries
This ridiculous rationale is the mantra of those who hate to cook, but barring a few rare exceptions, it’s simply not true. According to the United States Department of Agriculture, couples in the 19- to 50-year age range following a modest food budget spend approximately $143.10 per week on groceries, as of November 2014. However, the average fast food meal costs approximately $12.75 per person, according to The Christian Science Monitor. For eating out to be cost-effective, each person would only be able to have 5.6 meals per week — not including tax and tip.

3. If You Can Finance It, You Can Afford It
This terrible reasoning causes many people to fall deep into debt. Just because you can afford to make payments on a new TV, flashy car or other expensive item doesn’t mean it’s a good idea. When you finance something, you’re agreeing to pay interest on it, which substantially increases the number on the price tag. Rather than wasting your money on interest, save up and purchase it outright.

4. Take Out a Loan to Build Credit
Don’t take out a loan that you’ll have to pay interest on to build credit. Instead, open a credit card and pay it off in full each month. This will allow you to establish credit without incurring any added fees.

5. It’s Cheaper to Buy a New Car Every Few Years Than to Hold Onto an Old One
Consumer Reports notes that over the first five years of ownership, the median car costs more than $9,100 a year to own. However, if you keep the vehicle for eight years, this cost can be significantly decreased to an average of $7,800 per year. So keep the clunker as long as you can — until the repair bills outweigh the cost of a new car.

Finally, Signal Financial is here to help! Start with our budget worksheet by clicking here. Then, our qualified branch staff will be more than happy to evaluate your financial picture, recommend product solutions or even refer you to CAAB (Capital Area Asset Builders) for some more direction.

Source: MSN Money