Simplifying the way you manage your finances can make sticking to a budget much easier. Limiting the amount of time it takes to actually manage your budget will make it more likely that you will do it. With the right technique it should only take you 20-30 minutes a week to stay on track.

The most time-consuming part of the process is the actual setting up of the budget. So don’t try to do this with a house full of kids and other relatives over the holidays. Allocate the time and place, and stick to it. If necessary put a “Do not disturb” sign on your door, turn off your phone, and disconnect from the internet (eliminate distractions!).

While there is a plethora of software to simplify the preparation of a budget, a simple spreadsheet is all you need. Don’t complicate the process by having to learn a new program.

A good way to start is to assemble any bills and receipts you can get your hands on. A credit card statement is perfect if you charge most of your purchases. Begin your document by listing your monthly income and expenses. Estimate, in round numbers, what you spend on each expense every month. You don’t need to be precise, but err on the side of more rather than less with expenses.

Be sure to include:

* Mortgage/rent payments
* Utilities costs (electricity, gas, phone, water etc)
* Groceries
* Food
* Transport
* Car expenses
* Clothing
* Education expenses
* Entertainment
* Gifts

A Simple Budget – The 60% Solution

One of the simplest types of budget is called the “60 Percent Solution”. In essence, this budget aims for you to fit your monthly expenses within 60% of your gross income.

This will allow you flexibility for long and short term savings, spending money and retirement planning. These can be what often break a budget, because people fail to budget for them.

While the percentages will vary depending on your circumstances, consider the guidelines below:

Allocation of Income

60% – Monthly expenses
Housing, clothing, food, transportation, utilities, insurance, communication.

10% – Retirement
In some countries this forms part of a compulsory superannuation plan, but if it doesn’t for you, you should have this deducted automatically from your paycheck.

10% – Debt reduction or long term savings
A good financial adviser will recommend how to invest this money, which will also serve as an emergency fund.

10% – Short term savings
These are the funds set aside for those every now and then expenses: birthday and Christmas gifts, car maintenance or repairs, uninsured medical expenses, appliances, home maintenance.

10% – Pleasure
This will include recreation, eating out, movies or whatever you want, without the worry of breaking your budget.

Having a household budget with fewer categories will make it much more manageable and help you to realise your financial goals.

A Simple Household Finance Budget is a post from: Smart Money Mindset.com

In the lead up to Christmas we are always bombarded with sales messages. “Save 50% here!”, “Buy one get one free!”. These offers come to us with the promise of “saving” us money. Are you really saving money? Probably not!

It’s often the case that we end up spending, not saving as a result of these messages.

The reason is the Big “Saving Money” Scam – we are fooled (including fooling ourselves) into believing we are saving money by taking advantages of these offers. The reason is that we don’t realise there are actually three different ways to save money.

The Three Ways to Save Money

1) Wants-Driven Saving
2) Needs-Driven Saving
3) Cash Saving

1) Wants-Driven Saving

Ever seen a special offer that really grabbed your attention?! One like “60% off this plasma TV but only while stocks last!” “75% off this leather sofa – only for the next two weeks!”. You might already have a perfectly good TV and sofa but you don’t want to miss out on such a good deal right?

The fact is that the sales price is often just the real price or acceptable price to the retailer. For example have you have you ever heard of a sofa store where there isn’t a sale on?!

The sale price is often the price they need to make a decent profit. The law may have required them to sell that item at “full-price” for a time in some of their stores, but in reality they are happy with the sale price.

The reason this is important is because we are talking about “Wants-Driven Saving”. This is a saving on an item you are tempted to WANT but don’t really NEED. And what compels you to buy is the false idea that you are saving money in the future by buying the item.

Are You Realling Saving?
In actual fact you’re not saving money, you’re spending money – right now! Managing your money well relies on thinking about cash flow – this is a cash outflow from your monthly budget – not a cash inflow. This is a false or fake kind of saving, which will lead you to actually increase spending and most likely increase debt.

You are also being subjected to a sales trick called “creating scarcity”. The seller creates the sense that there is competition with others and that you may miss out on this wonderful deal since “the offer runs out soon!” or “all the items might sell!”

These purchases give us a momentary thrill, they make us feel good for a little while. And we quieten the little voice in our head saying “you’ve just spent money idiot!” by justifying it as “future savings” when nothing could be further from the truth.

The sad fact is that millions of people drive themselves into financial difficultly doing exactly this – all the while thinking they are being “financially smart”.

2) Needs-Driven Saving

Needs-Driven savings remarkably enough are savings based on items you NEED, not WANT. These are savings on items you would have bought ANYWAY, even if there was no discount or offer. For example this could be a two for one offer on groceries or a discount voucher for petrol.

These are real savings as you are reducing the amount of cash flowing out of your pocket – cash that would have flowed out anyway.

One of the best money saving tips is to focus on Needs-Driven Savings when you are being bombarded with savings offers. Filter through them and find the right ones.

For example my girlfriend was recently offered a card that gave 50% off at a lot of London restaurants, for a price of course. Now if we dined out a lot, and felt this was something that fitted under one of our needs, then the card might have been worth it. However interestingly enough the 50% discount didn’t apply on Fridays and Saturdays at most places, the days we were most likely to go out. And also we were able to get 50% off vouchers for most of our favourite restaurants anyway for free elsewhere – so for us that fell under Wants-Driven Saving and we didn’t get the card.

So Needs-Driven Saving does mean you save money. Now what to do with that cash you didn’t spend? Funny you should ask…

3) Cash Saving

This is what I would call really saving money. Taking money from your paycheck and putting it into a savings account. Why – because the cash is still there. It hasn’t been spent. It is earning interest. You have actually saved money which is now building on itself.

Part of cash saving can also includes paying down debt. This is because you immediately reduce your cash outflows when paying off debt. See my previous post A Guaranteed Profit On Your Money? It’s Possible!

So if you take the cash from Needs-Driven Saving and pay off debt, you not only save that cash, but also get a guaranteed return on it. Now doesn’t that all sound better than option 1 above?

The Challenge with Saving

The challenge for us is the balance between the three, particularly with Needs- versus Wants-Driven savings. For example what would you call saving money on expensive Christmas presents? Did you NEED to buy expensive presents in the first place? No-one’s immune to this by the way, myself I’m partially prone to spending on gadgets like the iPhone!

The answer is, as always, “it depends”.

It depends on your personal circumstances. If you are knee-deep in debt (usually because of Wants-Driven Spending!) then you will need to restrict yourself to spending on only the things you need, look for savings there, and focus on paying off debt. If you have more flexibility then spending on things you want isn’t necessarily a bad thing – so long as you don’t kid yourself into thinking you’re actually saving money… and so long as you are cutting unnecessary expenditure elsewhere.

Think about the last few times you were tempted by an “once-in-a-lifetime savings” offer? Did you really save money?

The Big “Saving Money” Scam is a post from: Smart Money Mindset.com

From a financial perspective, Christmas can be an extremely expensive time and if we’re not very careful the season of good will, will put us in debt for the next six months or more.

Managing Your Money at Christmas

Therefore, managing your money becomes even more important at Christmas time since it has the potential to damage your financial health for most of the coming year. (You’re not still paying for last Christmas are you?)

Everyone Wants Your Cash

There’s just so much stuff to pay out for and it’s not just gifts! From decorations, luxury food and cards to new clothes, travel expenses and work parties, much of which we don’t budget for. We’re expected to buy presents at great expense for all of our nearest and dearest, leave tips for the dustmen, postman and window cleaner and have a good stash of booze in the drinks cabinet for any passing visitors , it just seems never ending!

So what can you do to limit the financial damage that Christmas can have on your bank balance? Managing your money at Christmas requires two main things:

1. A small amount of time
2. Work with the budget you have (not the one you wish you had!)

Budgeting for Christmas Money Management

The very first thing to do is create a budget sheet to find out what you can actually afford to spend and stick with it! It should take you no more than an hour to sit down and work out what money you have available for Christmas. First write down all of your normal monthly outgoings such as mortgage, groceries, utility bills, phone, TV, travel expenses, insurances, etc. and add them up.

In a separate column write down all the ordinary money you have coming in for that month , so wages, any benefits (such as child benefit or tax credits), rent from lodgers, any money you have saved for Christmas etc. Do this for the months November, December and January and promise yourself that you will not be paying for Christmas after January!

Being Off Work Saves You Money

Now comes the important bit: add to your incoming column any Christmas bonuses you will receive and any savings you might make because you are not at work (yes it’s often cheaper to be at home than at work!). Because you are off for a week or two, you might well be saving on travel expenses and parking fees. You might also save on paying out for lunches and coffees every day. Add all these savings to your income for the month(s); subtract the figure for your income from your outgoings and voila , this is what you have to spend. Take a bit from January if you must, but make a commitment to pay that off in January!

Managing your money at Christmas does take a little thought and effort, but by using just one hour wisely you can save yourself a lot of money and a lot of financial pressure in the new year.

Managing Your Money at Christmas is a post from: Smart Money Mindset.com

Are you living within your means? Do you know exactly what you are spending each month or are your outgoings escalating out of control? When was the last time you carried out a financial health check? If your answers are no, no and never then read on!

Managing Your Money – Take Charge of Your Finances

There are many important responsibilities to take care of as an adult – our health, family, work, friendships, hobbies and home – but how many of us devote as much time to our financial health, as we do to all the other tasks we have to perform? Not many of us! Yet managing your money successfully, underpins your ability to enjoy and make the most of all of the other aspects of your life.

Why not think about setting aside some time each week to go through your finances and make sure that you are on track for the month? It really will be worth the time and effort and you will probably find areas where you can save money.

Budgeting

The first thing to do is to set out your monthly budget including what’s coming in and what’s going out.

Incoming
It’s usually easy enough to work out what we have coming in – the list is often a lot shorter than for the one going out! You will need to include your wages or government benefits and any family assistance that you receive. If you have any other regular incoming funds add them also.

Working out Your Outgoings
Make sure that you include absolutely everything you are spending each month. It’s often the little things that add up and take us over our monthly budget. So apart from the big costs such as mortgage or rent payments, food and loans which you will need to list, don’t forget to also include:

* Lunches – (yours, your children’s and your partners)
* Travel
* Magazines
* Those little trips to the local shop
* Birthday Cards and Presents
* Children’s Pocket Money
* Meals Out/Take Aways
* Coffee/Tea
* Charity Donations
* Vet’s Bills
* Dentistry
* Children’s Clubs and Activities
* Wine/Beer
* Lottery Tickets

Once you have a figure for your incoming finances and one for your outgoings, simply take one from the other to see if you are over or under your monthly budget. You may be surprised at what you find!

If you are going over your monthly budget you are more than likely using your credit card frequently to pay for extras. This is ok in the short term as long as you can pay off your credit card debt each month, but managing your money in this way over the long term can lead to your debts spiralling out of control, especially when you consider how much the credit card companies are making out of you.

Look through your list of outgoings and see what you can cut down on or cut out altogether and start taking charge of managing your money instead of it managing you!

Managing Your Money – Take Charge of Your Finances is a post from: Smart Money Mindset.com

Learn how in only a 5 minute phonecall you could save double digit amounts on your credit card interest rate!

Credit card companies are keen to keep you as their customer – no matter how they may act. You are worth a lot of money to your card company and have a lot more power than you realise in your relationship with them. Use this fact, and the call scripts below, to your advantage to lower interest rates on your credit cards by simply asking them. You can save thousands using this method.

Credit cards and how they make money

Credit card companies make money from their customers in a variety of different ways. Apart from the interest rate they also make money from late payment fees, cash withdrawal or credit card cheque fees, or even from companies that want to put leaflets in your monthly statement letter.

However people aren’t aware that credit card companies also make money by you simply using the card, as retailers are charged a fee by the companies providing the card machines in their stores, and part of that goes to your credit card company. So credit card companies are very interested in keeping you as a customer – remember this in your call!

You must understand how call centers work

The majority of your interaction with your credit card company will be over the phone, and so will this negotiation, so you need to know how call centers work. I worked in a call center for over a year on various campaigns as they are called, on both inbound and outbound calls. My job was to monitor and train call center staff on making sales calls and dealing with customer cancellations – i.e. stopping them.

What you’ll find with call center staff is that they will have differing levels of authority to take actions depending on their experience and grade. So whilst one might not be able to change anything on your account, others will be able to make significant changes. The call center staff will also be under instructions to NOT lose customers – remember you are worth money to the card company and they will avoid losing you as far as possible.

The Negotiation and Call Script

For this I want to use some key negotiation principles. Firstly make it fun – negotiation is a game remember? So have fun on the call and smile (the person on the other end of the phone will be able to tell). Secondly use powerful open questions, and no questions with a yes/no answer. When asking questions put the pressure on the other person to come up with a solution – make it their problem.

So call your credit card company and follow these instructions:

After the introduction and security checks the call should go as follows:

Call center: “So how may I help you?”
You: “Could you tell me the APR on my credit card please?”
Call center: “It’s XX% sir”
You: “Please reduce that for me”

At this point the call center may be a bit lost, but will likely ask why you want the rate reduced or will say it’s not possible. In response do not say things like “Are you sure?” or “Why can’t you reduce it?” as these offer an easy way out to end the call there and then. Instead tell them that you are a good customer, have been paying your card on time and would like the rate reduced please. After your explaination use the line “So, please reduce the rate for me”. The use of the word “So” is important as it implies everything that been said before it is true and justifies what is said after.

If they refuse again use the argument that you have been offered better rates elsewhere, but you don’t want the inconvenience of moving credit card companies. Use the “So…” line again. A lot of companies have a three “No” rule which means around the third “No” from either person, a different approach has to be used.

If the call center representative says they are not authorised to lower the APR then ask to speak to someone who is, and repeat the above script.

You are most likely to be successful if you also bank with the card company, have a good history of making payments on time on the card, have regular use of the card, have a good credit score, or any combination of those.

What if they say no?

So what happens if you are unsuccessful? Just try again. Yes, it’s that simple. You will most likely get through to another advisor, and hopefully one with greater authority to change your rate. If they say “I notice you called earlier today/this week” just answer “yes” and stay silent. What if you called earlier? It doesn’t change anything about this call, although they will hope it puts you off asking them to reduce the rate again.

It’s worth trying this!

Changing your credit card APR can make a huge difference to you, especially if you are in the process of paying off your debts. For example if you have a balance of $1,000, and minimum payments of 2% of your balance per month, a change of APR from 20% to 15% could reduce the actual amount of interest you pay in cash by up to 56%! (I’ve made some nice spreadsheets that do all the calculations for me in case you’re wondering!). So it’s well worth trying it out!

Tell me how you get on

Please do try this out and tell me how you get on. I would love to hear from people who have tried the above technique and got their rates down – and try it on multiple cards if you have more than one. If you don’t mind send me the figures on your balance, the minimum payment per month, and the old and new APR so I can work out the impact it will have on your finances. Email these to info@smartmoneymindset.com.

Good luck and remember the customer is always right!

Reduce the APR on Your Credit Card in 5 Minutes! is a post from: Smart Money Mindset.com

Here’s some advice on using negotiation tactics learnt from Indian parents to save yourself plenty of money.

One thing about being the child of Indian parents is that you get to see them in operation across a number of areas – feeding 200 members of family with a highly effective mobile kitchen infantry unit; fitting 200 members of family into a three bed-semi; getting every single auntie you’ve ever met to drag you onto the dancefloor at a wedding; organising an array of potential suitors when a daughter or son is ready for marriage (I’ve managed to evade this one so far!).

However the most impressive, and to be honest most uncomfortable, is when they are negotiating over buying something. You see being brought up in the UK has given me the fantastic quality of English politeness, which is respected around the world. However our desire to be what we think is polite often leads us to missing out on opportunities to save money.

I remember many a time wanting to curl up and become invisible when the following conversation would take place when on holiday between my mum and usually a shop keeper trying to sell some souvenir or gift:

Mum: “How much is this please?”
Shop keeper: “It’s $50 Madam” (or whatever the currency was)
Mum: “That’s too much, I’ll give you $5″

Now my wanting to be polite would never let me start the negotiation off there, but my mum had been genetically engineered as an Indian to know how to negotiate, and had also probably seen her parents do the same. And you know what? She might not have got it at $5, but most likely at $10 (still less than my starting price would have been), and interestingly that was usually the price the shopkeeper was aiming for anyway.

This tactic is known as an Opening Gambit in negotiation terms and stated simply means “Ask for more than you expect to get”. You will quite often surprise yourself with what is possible.

There’s a saying that goes “You never make more money per hour than when you’re negotiating”. If you think about it, it’s usually true.

What’s being too polite costing you? Let me know and what you could do about it!

Check out my upcoming Top Ten Indian Negotiation Tactics for more on this!

How Being Too Polite Costs You Money is a post from: Smart Money Mindset.com

Save Money on Virtually Anything With The Top Ten Indian Negiotiation Tactics (TINTs)

Here’s my top ten list of the Indian Negotiation Tactics (TINTs as I call them) that I have picked up off parents, uncles, and random relatives I’d never seen before or probably will again…

I’ve used these and similar tactics to negotiate anything from £5 off a hat to over £100,000 off an investment property. The key is to take one tactic and try it out next time you are buying something, get comfortable using it, and then add more tactics as you go.

Of course you probably can’t use these tactics in Harrods (although I’d be interested to hear if anyone has!) but without doubt these will save you money.

10. Be a reluctant buyer

Approach the negotiation as if you’re not really interested in buying and just looking. Any whiff of keeness on your part and the price automatically increases.

9. Get them to go first

Never ever give your price first – even if they have a price tag get them to start the negotiation with a price. If possible get them to give you an already discounted price before the negotiation starts. A good line is: “What’s the best price you could give me on this my friend?” (add the my friend bit in there to make it harder for them to be hard-nosed with you!)

8. Flinch and Use Silence

When you get the price flinch, as if it almost hurts to hear that price, and at the same time say something like “Wow!” or repeat the price… then stay silent, even if it gets uncomfortable. The last bit is key!

7. Always ask for more than you expect to get

Always set your price lower than you’re prepared to pay. If you set it at what you want to pay and they accept immediately you’ve lost out on saving some money!

6. Smile and make it fun

Negotiation is a game and treat it as such. Always be smiling and friendly, joke and make it fun. It’ll make the process more light-hearted and harder for the seller to resist your demands.

5. Bracket

Bracketing is where you make a counter offer so that the average of the prices is really what you’re prepared to pay. E.g. If the price is £20, and you’re happy to pay £15, offer them £10 and let them come down.

4. Take up lots of their time

The more time you take up, the more energy and effort the seller has invested in the negotiation, and the harder it is for them to walk away without getting something back for all that time and effort.

3. Remove authority

Make it so that you are not the decision-maker. e.g. “I have to check with my husband/wife etc.” That way you always appear friendly and blameless for all the negotiation hassle

2. Ask for that bit extra

Even once you’ve got down to almost agreeing a price and you sense the seller won’t budge, ask for something extra to seal the deal that is not cash. For example if you’re buying a bed and sidetables, ask for a lamp for the sidetables so you can read at night.

1. Be prepared to walk away

And finally, but most importantly – in any true negotiation you have to be prepared to walk away. The moment you think you want what’s on offer and won’t go back your mindset will change, and the seller will pick up on this. Always be prepared to walk. Very often you get the deal just as you’re walking out the door.

Let me know what you think of these!

Save Money With Indian Negotiation Tactics! is a post from: Smart Money Mindset.com