Unfortunately, figuring out taxes, how to budget our money and balance the bank account with a checkbook register are things we do not get taught as part of general education. Yet these are perhaps the most vital to how we run our lives and our financial well-being. The key idea is that each of us do not have infinite resources, and we must be prepared to evaluate choices to use our finite resources efficiently. This is the core idea in personal finance budgeting.
Before we are able to weigh the choices and allocate resources effectively, it is important to survey our needs and how we use money. The first step to financial surveying is to take out the credit card statement as well as the bank account statement, and then go through each item putting them into categories. For example, costs for watching or renting movies goes into entertainment, whereas costs for gas and electricity goes into necessary utilities.
After categorizing each kind of cost, it becomes easier to decide how to eliminate things. Some things cannot be eliminated, which make them basic or fixed costs, such as rent. Some things cannot be eliminated, but can be adjusted or substituted, making them variable costs. For example, watching a movie in the theater once a movie can be effectively substituted by renting from Red Box for much cheaper. And finally, some costs can be removed entirely.
In the following, we list out some types of transactions and costs and how to manage them.
The monthly cell phone bill is a variable cost. It is likely that you have an out of date phone plan and are paying too much every month for your phone bill. To compare cellular phone plans, find a good money management website where you can enter your information and see what else might be available to you. You should be able to compare your phone plan with those suggested to you now and choose one that will suit your requirements.
Acquiring appliances for your house or apartment belongs to the category of variable costs also. A sizable appliance can be a challenge to your budget both in the purchase price and in the cost of energy needed to run the appliance. Every consumer website will tell you that it is important to find out about the energy star ratings and energy requirements of an appliance before purchasing it.
Health insurance is a fixed cost, but can be controlled. Your job may help you to get lower insurance rates – if you are in a low-risk (safe) position, your insurance may cost you less. Some fairly “safe” jobs are teaching and accounting so if you own this sort of job, you may be able to get lower costs on your health insurance.
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