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Balancing Your Budget to Spend Less and Invest More

If you are like most of us, you will more than likely have to build up your finances before reaching a place where you are comfortable with investing. The key is finding the budget balance between saving spending and investing, which isn’t as easy as it sounds. Follow these tips to budget better, spend smarter and more savings.

Automate Debts

Consider all of your yearly expenses such as television, transportation, and food — whenever possible, choose to have these payments automated. Automated payments will help to develop the healthy habit of spending less. The most important items will be covered and you’ll be left with a remnant that you can choose to save or to spend, with a lower likelihood of overspending. In the long run this habit helps with retirement planning, children’s college savings plans, and/or a savings account. Not having the option to pay a bill can be your best tool when saving because it a) it forces you to have sufficient funds in your account to cover those payments and b) it trains you to have less spending money and still survive.

Check Credit Scores Often

Under federal regulations, credit checks are free once a year. Some credit card companies, such as Discover, even offer a free monthly FICO credit score. Make sure there are no inaccuracies within your credit report, and no outstanding payments, lest your report score drop. Good credit ratings allow you to borrow at better rates, as well as save more on new investments.

Track Expenses

You can create an expense tracker on your own (or use handy tools such as Mint.com) to monitor daily expenses. Monitoring expenses helps you to understand where your money is going, and where you can improve your spending habits — a simple, and sobering process. Categorize all your spending, and make small statistical analysis. You may notice that with a few tweaks, you can save yourself hundreds (or thousands) over the course of a year. You will see all of your spending (and saving) areas of opportunity and can adjust accordingly. A few months of developing this monitoring habit will allow you to stabilize spending and save extra money.

Stay Determined to Reach Investment Goals

It may appear that home ownership, retirement, and children’s savings funds are far reaching goals, but breaking those down into attainable monthly or weekly goals will help you to reach them in the long term. Make more rational decisions about your spending and stray away from managing money with your emotions.

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When you reach the place where you are able to dedicate a portion of savings to reputable, stable investments, you will likely earn more in the long term. Make a business plan to have a whole portfolio with desired/accumulated returns. Know the market you are investing in (current macroeconomic trends, regulations, legal base, average return rates) and understand potential risks. Many people are managing money led by their emotions — by contrast, make rational decisions based on past and projected performance, and current data.

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