by Silvia Dekumbis

Created on: July 06, 2010   Last Updated: July 07, 2010

How easy it is to charge that new washer and dryer on the credit card. Or, why not replace the TV with one of those new high definition ones that can be purchased with zero down and no payment for 12 months. Most of us have probably been tricked by the short-term advantages of buying something on credit. Once we read our credit card statement though, taking a glimpse at the minimum payment due, we realize that we are currently living outside our recommended budget.  Nevertheless, life is so expensive. If we need something, it is so convenient and easy to just charge it.  We forget the fact that we somehow need to pay it back.

Having been in a situation that forced me to sell my house and start at zero, I designed a budget adjustable to any income and basic living expenses without ever having to use my credit card again.  It is so simple that anyone can apply it and still purchase household items, new appliances and occasionally treat themselves to a vacation.   However, it does take discipline and an ambition to stick to the plan, not giving in on the temptations and possibilities of credit cards.

Step Number One: If your taxes aren’t already deducted from your paycheck, combine your monthly income and transfer at least 10% into a savings account on a monthly basis. Designate this savings account as your tax money account.  This will assure you that you will have enough money saved up by April when taxes are due.

Step Number Two:  Once you have deducted your tax money, take the combined income deducting all necessary living expenses. This should include food, cleaning and hygiene products, gasoline money, utilities, rent, health insurance.  At that point you should have some money left, at least a few hundred, but hopefully at least 800-1500 dollars. 

Step Number Three: Set up a savings account for your next car purchase and/or car repairs. Depending on your available funds, you should deposit a significant amount into this account on a monthly basis. It will give you the necessary cushion should something happen to your car.

Step Number Four: Set up a health spending account. Even if you just deposit a small amount per month, it will help you pay that medical or dental bill.

Step Number Five: Set up a savings account for home appliance purchases or anything that you need for your home. Again, even a small amount will do it here since you don’t need a washer or dryer every six months or a new TV every year.

Step Number Six: Set up a vacation account.  Depending on your preference and the cost involved, choose an amount that works for you. Vacation time is important even if it is just a weekend away from home.

Step Number Seven: Hide a piggy bank in your closet. This shall be your personal fashion and accessories spending account. The more your style desires, the more you have to deposit into that piggy bank.

Now the question probably arises about online purchases.  ost on-line sellers offer payments through pay-pal.  It is very easy to set up a pay-pal account and transfer money for the purpose of making on-line payments.

It might all sound a bit complicated but only takes some organizational skills to set it all up. By growing those individual savings, whether at home or at the bank, you won’t make purchases anymore you can’t afford, finally keeping your head above water.  At the same time, it will give you a sense of satisfaction to own something that you have worked for and already paid for than something you still owe months of payments on.   

Start applying this strategy now.  It will take some time to adjust but in the long run save us lots of hassles and headaches.

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