Worthwhile Financial Goals: Cut Spending

Worthwhile Financial Goals: Cut Spending is a post originally published on: Everything FinanceEverything Finance – Its all about Money!

Cut spending with these five easy tips in order to meet your savings goals.Did you resolve to decrease your spending by a certain amount this year? That’s a great financial goal to have, and one that can easily be achieved without making your life miserable.

Just use the following baby steps to get to reach your goal.

Figure out How Much You Need to Cut

“Cut spending” isn’t exactly the best goal to have because it’s too vague. If that was your New Year’s resolution, then technically you could cross it off your list if you just decreased your spending by $ 1.

Instead, make your goal more specific. How much do you want to cut from your spending? Is this amount per week, month, or year? Where will this extra money go to?

For example, a better resolution would be: “Cut my overall spending by $ 100 a month to put into a savings account”.

With this goal, you have a number you’re working toward, and you’re also giving that money a new job. The amount of money saved and where the money goes is totally up to you.

You can put your money towards debt, vacation, or a new purchase. As long as you give yourself a more concrete goal, then you’re good to go.

Figure out Which Areas in Your Budget Need Trimming

Now that you know how much you need to save each month, figure out which categories in your budget this amount will be coming from.

Start brainstorming some ideas on how you can cut your costs without making a huge sacrifice to your everyday living. Here are some steps to try:

  • Call every bill company you have and ask if there are any specials or discounts available. By doing this, my husband has saved $ 20-30 on our internet bill each month. I once called our car insurance company and just switched the drivers – that saved us about $ 20-40 a month, too.
  • Look into changing services. We thought we were getting a good deal on our smartphones since we were on a family plan with my husband’s sister and brother-in-law. However, their phone usage was actually causing us to pay more (or at least, they were charging us more by splitting the bill evenly). By switching to our own line with a different phone company, and then utilizing the family plan to save my sister and father money, we cut our bill by $ 63/month, while keeping the same phones and perks! It’s a pain to change companies sometimes, but it can save you a lot of money in the long run. Try getting new quotes from the following providers: car insurance, health insurance, cable, internet, cell phones, and more.
  • Change the way you use electricity. Electric bills always seem unpredictable, but by doing simple tasks each day, you can really save money. Simply unplugging unused devices and appliances can make a difference. The use of a Nest (a programmable thermostat), has allowed us to keep our electric bill under $ 100 almost every month (though it can get to $ 150-190 if we have a really hot summer month). Our Nest has also unlocked special promotions with our electric company. They give us a credit if they are allowed to control our temperature for a few hours for up to ten days during the summer.
  • Just say no to fast food. Fast food is truly the biggest waste of money, but such a bad habit to break. Figure out how you can spend a little more at the grocery store to avoid running to fast food when you are in a pinch. Perhaps pre-chopped veggies will motivate you to cook more, or frozen meals will help you eat lunch at the office.

There are many little tricks you can use to shave off money from each section of your budget. Make it your goal to find several of these tricks and try a new one each week.

When it comes to cutting your overall spending, don’t look at it as an overwhelming goal. Instead, focus on taking small baby steps and getting to your goal of cutting $ X each month.

How have you cut down on your spending in the past? What did you do with the money you saved?

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Terms you need to Know in order to Understand Financial Risk

When it comes to investing there are a lot of terms that you really need to know in order to be able to make educated decisions. Many of those terms deal with the financial risk that you take when investing, and knowing those terms is vitally important to your success. Below you’ll find the most important financial risk terms that you need to know. Enjoy.

Probably the most important term is Market Risk or what’s known as “principal risk”. This term refers to the chance that a downturn in the market, or a bad investment, lowers the value of any asset you might have. It’s used mostly for stocks and bonds.

At the other end of the spectrum from market risk is Risk of Avoiding Risk. This usually applies to investors who are too conservative and whose investments don’t grow fast enough to keep up with inflation.

Many consumers seek the elusive risk-free return by putting their money into CDs. The problem with this is Interest Rate Risk, which you face if your assets get stuck at a below average rate of return because interest rates have risen.

One term that applies to an individual more than the market is Shortfall Risk, the risk that an investor won’t have enough money to make their goals. Being too conservative or, on the other hand, too aggressive, can open an investor up to shortfall risk. For consumer that doesn’t believe their portfolio is strong enough, saving more is the key to addressing shortfall risk.

A similar term is Special Situation Risk, which applies to an individual investor with special needs like a wedding, home purchase or college costs. A couple that is so worried about paying college for their child that it distracts them from saving for their own retirement, for example, is suffering from special situation risk.

Timing Risk is similar to special situation risk in that it depends on the individual investor as well as the specific timing that they’ll need to keep up with in order to have enough money by the time a specific event occurs. For example, if an investor is going to be purchasing a home in four years but it doesn’t appear that their stocks will make enough money to enable them to do that, their timing risk is high.

If government decisions could possibly damage the value of any of your investments or assets, you have Political Risk. Obamacare, tax law changes and changes to Social Security are all specific political risks in that all of them may negatively affect your investments.

Looking at everything from a “big picture” perspective, Societal Risk is the risk that your assets and investments face due to world events like terrorist attacks, wars and natural disasters.

Unless you’re a complete newb  investor, you should already know that Diversification is one of the best ways, if not the best way, to lower your risk from any of the factors above. Diversification means simply spreading your money around in different assets and asset classes so that, if one were to falter or fail, the others will still continue to grow, keeping you from losing everything.

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