If you're out of money before your next paycheck arrives, it's probably time to set up a budget.
Setting up - and following - a budget is the best way to start digging yourself out of a financial hole.
Be wary of payday loans, advance-fee loans or other schemes that promise an easy solution to your money problems. Common complaints include consumers who have received notices about government grants, mystery shopping "job" offers and other ways to reduce their bills by refinancing their homes, taking out a loan or improving credit scores. But many of these offers can cost you money without improving your financial picture. Even worse, some offers are from scammers seeking your personal information or money to line their own pockets.
To get started on a budget, first write down what money you have coming in: wages, child support, interest income, rental income or stock dividends, for example.
You'll also need to keep track of your spending to find out where the money is going.
Some costs - such as rent, car payments or utilities - can't be trimmed. However, most people will find things that can be cut back, such as packing your lunch rather than eating out. Are there things you're paying for that you don't need, such as an extra cell phone, computer or car? What expenses are "needs," and what are "wants?"
You also may consider finding ways to increase your income, such as taking a part-time job, turning a hobby into a business or holding a yard sale to get rid of unwanted household goods.
If you find you're seriously in debt, you may consider working with a nonprofit credit counseling agency, such as Clearpoint Financial, which partners with Better Business Bureau on consumer finance issues.
Once you achieve a balance between spending and income, consider socking some money away in a savings account or emergency fund. Smart saving strategies include:
• Pay yourself first, putting a small amount aside every week. Even $10 a week will grow to more than $500 by the end of the year.
• Build up an emergency fund equal to at least three months' worth of income.
• Take advantage of employee benefit plans, such as 401(k) retirement savings plans. These plans allow you to save money before taxes, and many employers match at least part of your contributions.
• Be smart when you choose a savings account. Shop around for the best rates; consider fees and other features.
Don't just set up a budget and forget it. Review it regularly to see if you're still on track. If you're finding it hard to meet your goals, you may need to revise the budget to accommodate your needs. Make a plan you can live with, and stick to it.
Mike Harrison is regional director for the Mid Missouri Better Business Bureau, whose mission is to create a marketplace where buyers and sellers can trust each other. He can be contacted at [email protected].