WASHINGTON Finances or bad food?
Which will you promise to get right or give up in the new year?
People say services for fiscal fitness rate above services for physical fitness when making their New Year's resolutions, according to a survey by Allianz Life Insurance.
But when asked what resolution for 2010 they are most likely to keep, more people said they would stick to a diet and exercise plan than would keep a promise to manage their money better. I guess I shouldn't be surprised that when asked whether financial planning was part of their New Year's resolutions, 33.6 percent of the survey respondents answered, "I don't have enough money to worry about it."
You always need a plan for your finances, whether you have a yearly income of $20,000 or $200,000, and whether you have savings and investments or not.
Here's a mantra I want you to adopt for the new year: "Every penny should have a purpose." This means you need a plan for your money. As I go through my mail, I've pulled out questions from people who want an action plan.
"Please tell me about the envelope system," one reader wrote. "I make $45,000 a year. I am in debt for $12,000. I overspend on food. I use my check card a lot, and I get in trouble with it. I also use my credit card if I don't have the money. I am in big trouble with my husband."
Another asked: "I am married, but my husband and I aren't on one accord on anything. I would like to get out of debt, but I am having a difficult time getting started on a budget. Do you have any advice?"
Here's where the brilliance of the envelope budgeting system comes in. Sometimes, for some people, they need a simple way to control what they spend.
I learned to budget using envelopes from my grandmother, Big Mama. To get started, you don't need much, just a pencil and a box of envelopes. I prefer an 8-by-11-inch security envelope with a lining to shield what's inside.
On payday, you put cash into various envelopes. You don't have to stop automatically depositing your paycheck into your bank account. But you will need to make a trip to the ATM or your bank branch to withdraw cash.
You are going to label each envelope with an expense category such as groceries, gas, dining out or entertainment. So, for example, if you've budgeted $500 a month for food and you get paid every two weeks, take $250 and put it in the envelope marked for groceries.
Then when you go to the supermarket, you pay for your purchases using the cash in the envelope. Subtract what you've spent and keep a running tally on front of the envelope. Using a pencil will let you erase the math, saving envelopes.
If you are married, create an envelope for your personal spending allowance. Of course, this means agreeing on a set amount you each get to spend on whatever you want. Using the envelope system will help reduce the many arguments that occur when both spouses are withdrawing money from the ATM without consulting each other. If you each have your own envelope with your budgeted cash, the fussing stops.
Once the money in the envelope is gone, you can't spend until you get paid again. But if you have money remaining, you can keep it for the same category next month, apply it to debt or put it in savings.
Michelle Singletary welcomes comments and column ideas but cannot offer specific personal financial advice. Readers can write to her c/o The Washington Post, 1150 15th St. NW, Washington, DC 20071, or e-mail her at singletarym@washpost.com.
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