So, maybe 2008 wasn’t the best year for you financially. That doesn’t mean that 2009 needs to be more of the same. The Being Frugal blog has a bunch of tips for making 2009 a good financial year:

• Get an accurate picture of your current financial position - calculate your balances in terms of debts, savings, loans and investments. You have to know where you’re starting from.
• Always pay yourself first. That is, put a portion of every pay check into savings or investments.
• Decide on your financial priorities. You can achieve a lot if you put your mind to it but not everything at once, so figure out what financial goals are the most important to you.
• Learn about finances. If you are ready to do some investment, read up online and in the library to learn the best way to do it. You don’t always have to spend money on fancy courses to learn how to make money.
• Create less waste by only buying what you really need and will use - food is a good example of this.
• Focus on what you have (not what you don’t have) by also doing some giving. This doesn’t have to be financial contributions to charity - you can also give your time as a volunteer to help other people.
• Give up trying to “keep up with the Joneses” - just learn to be satisfied with what you can afford.

There are numerous theories out there on the best way to make your own budget but the clearest, most logical we’ve found in a long while comes from the Financial Planning site at About.com. It involves gathering a fair bit of information and spending an hour or so collating it, but it sounds like it will make a realistic budget that you can actually use to help you save money or get out of debt. The main steps are:

1. Gather together every relevant bit of paper - bank statements, household bills, income information and so on. You aim to create a monthly average which means that the more you can gather the better, to average in payments that you may only make once or twice a year.
2. Calculate your total income from all sources, including your job, investment income or anything else, and make a monthly average.
3. Calculate your total expenses over the period of the paperwork you’ve gathered (or longer if you know of other important payments) and figure out the monthly average.
4. List all your expenses, dividing them up into fixed and variable expenses.
5. Total up your monthly “profit or loss”, and hope that it’s a profit. If not, you’ll need to figure out some changes to your budget immediately. If you do have money left over, you must decide where to allocate it - for example to an emergency fund, or to a retirement savings plan.
6. Adjust expenses where you can to save more money.
7. Every month, sit down and review your budget. It only takes a few minutes but can save you a lot of money.

According to Nora at the Wisebread blog, you can stick to a budget on vacation and still have fun. She recently wrote about a bunch of vacationers she ate with at a Hawaiian restaurant’s “Taco Tuesday” night and noticed how each of them had a different budget - but the ones who didn’t spend so much were still having just as much fun on their vacation as those who were maxing out their credit cards.

Some of Nora’s useful advice for not blowing all your savings on vacation - but still having fun - include:

• Focus on the people you’re spending your vacation with. You can enjoy time with them without having to spend a lot of money - you can even skip a fancy restaurant meal by buying wine, cheese and crackers and have a relaxing picnic in a local park or near the beach.
• Don’t spend heaps of money on souvenirs and gifts for friends back home. If you see something that you think a friend would really love, by all means buy it, but don’t try to get something for everyone out of some feeling of obligation.
• You don’t have to go to expensive restaurants for special meals to make it a special vacation.
• Don’t justify doing all the extra trappings (a helicopter ride, for example) “just because you’re on vacation” - there are always other ways to enjoy the trip and some sightseeing and sometimes they’ll be much more enjoyable than the pricier activities.

With the new year here it is very important that you have a budget in place to guide you through the next 12 months. Do you have a budget that you can rely on? If so, you should be set from here on out. But if you don’t have a budget you need to stop what you are doing and fix this problem at once. Many people feel that budgeting is a waste of time, but you will find out soon enough that this is not the case.

Contrary to popular belief you don’t have to spend a lot of time devising a budget for the new year. You don’t want to rush but you don’t want to spend several weeks figuring things out either. Instead, set aside some time during which you can set a budget based on your income, expenses, and savings goals.

It goes without saying that you need to have a budget in place for 2009. If you have yet to do so you are already behind the eight ball. Fortunately, you have time to catch up if you get on your toes and take the proper steps. No matter who you are and what your finances look like you can benefit from a budget.

Over at the Simple Dollar, a recent post about the intriguing notion of wallet fasting made a lot of sense. “Wallet fasting” is a habit that many people who are not quite in control of their finances have - when they notice they have a spending problem or are getting too deep into debt, they simply go on a spending “fast” and cut out every non-necessity. They just don’t open their wallet.

And while this might have a positive effect on finances in the short-term, it’s not a long term solution. What usually happens is that as soon as the bank balance looks a bit better, people start to spend money again - “just once” - and soon they’re back into their old spending habits again. Nothing has changed.

If this sounds like you, then sit down and take note. Spending habits will only change if you put some serious consideration into what’s going wrong with your spending pattern and how you can change that in a meaningful and permanent way. It’s one of those things that makes perfect sense but is sometimes hard to do - but definitely worth the effort. If you’re in the habit of “wallet fasting” then make a resolution to change the habit properly and only then will you start to see some significant change.

Having an emergency fund is a basic principle of personal financial management that many experts talk about. An emergency fund should be readily available cash that could cover living expenses for at least six months, and perhaps longer if you work in an industry where it may be difficult to find a new job or you are not eligible for unemployment benefits.

There was a nice story at the No Credit Needed blog recently about a guy who was laid off from his job - but had been smart enough to save up his emergency fund already. That means that instead of being totally panicked about the lay-off, he is calm and looking forward. One big advantage of having the emergency fund available is that he doesn’t have to scramble to get “just any” job - there’s a risk then that he might get trapped in a low-paying job without the flexibility of time to find a better job in his industry.

His story is encouraging and he wants to make sure everybody knows just how important it is to have an emergency fund, because you can never predict the future - except that now, you can predict that a larger number of people than usual will be losing their jobs, making the emergency fund even more vital.

Sticking to a budget can be as simple as following three basic personality traits, according to About.com’s Financial Planning site. They make it sound so easy - I know it’s not - but perhaps giving some thought to the three personality traits they describe could at least help you go further towards creating a budget and following it.

1. Have a positive attitude: This advice can apply for pretty much everything in life, but where budgeting is concerned, a positive attitude means focusing on the rewards that following a budget can bring. For example, focus on how happy being more financially secure will make you feel or the joy when you’ve completely paid off your credit card debt.
2. Remain motivated: When the will to stick to the budget starts to sag, consider giving yourself rewards for sticking to it or even increasing your goals. That is, give yourself a challenge to save an extra amount one month - sometimes setting yourself tougher goals for a short-term can motivate you by giving you a big success sooner than you’re expecting.
3. Have realistic expectations: Start with small “bite-sized” goals and short time frames - start the budgeting process step by step, rather than immediately striving for large lofty goals like “being debt free within two years”. Make your budget goals realistic and frequently reachable, then make some more.

If you’re working as a freelancer or are paid almost entirely on commissions, you’ll be one of the people who have a variable income and therefore need a slightly different approach to money management. Money Magazine recently put together some tips for those living on a flexible income which could help you out.

• Figure out the lower limit of your income and make a budget to suit. For example, look at your income over the last five years (if you’ve been paid “flexibly” for that long) and take the lowest income level. Make a monthly budget that you could survive on at this income level.
• Have a larger emergency fund than others - while fixed salary workers generally should have three to six months’ expenses as an emergency fund, the risks of earning less for a freelancer is higher and they should have enough cash saved to survive at least twelve months.
• Save for your retirement - this is often neglected by freelancers who don’t have an employer making contributions for them, so get some financial advice on the best way you can do this and make it a priority.
• When you earn money above this minimum rate, use it carefully to achieve other goals you have - for example, paying down debt like credit cards or car loans.

While most people (quite logically) wait until January 1 to make their New Year Resolutions, perhaps there’s a very good case for making your financial resolutions a bit earlier - like now!

The time between early November and the end of December is often an expensive one with the holiday season and the dangers of spending extra on your credit card - especially, for example, to buy Christmas gifts - with the good intention of paying it all off in January. But if you are wise enough to start making your new financial resolutions now, you might be able to start the year off on a much more positive note.

First of all, don’t buy expensive gifts over the holiday season just to “keep up” with other people. If your family and friends knew that you would be putting yourself into more debt to be able to give them a gift, they would rather not receive the gift - and if they don’t think this way, they don’t deserve a gift. There are also plenty of creative ways to come up with cheaper but still thoughtful gift ideas.

And secondly, don’t relax too much into the spirit of the holiday season, Thanksgiving included, by spending more because it’s a “special occasion”. You can make it more special by sticking to your budget, not using your credit card if you don’t have the cash to back it up, and remembering that come January or February, you’ll still be feeling happier compared to the distress you might feel if you spend too much now and have the bills roll in early in 2009.

photo credit: Joe Lanman

Creating and sticking to a budget is an arduous task for many people, and one that puts them off saving money or paying off debt more quickly. That’s why I like the Wall Street Journal’s recent approach to not planning a budget but instead creating a spending plan. Some of the key tips to having a workable spending plan are:

• Start by calculating your fixed monthly costs - rent or mortgage payments, household bills, cell phone plans, transport costs like fuel or bus tickets, insurance and groceries. These are things that rarely change from month to month.
• Subtract this amount from your salary or other income, and the amount you’re left with is the amount that you actually have a real “choice” about spending, and it’s here where you need a good spending plan.
• Before each new month begins, make a list of the things you would like to buy with this money. Some might be more necessary than others, for example clothes to wear to work may have a higher priority than a new video game - try to list them in this order.
• Including “savings” as the top priority for this money, and aim to make it around 10% of your income if possible; if not, start lower and review this regularly to increase it.
• Then plan which of the other items on your list you will be able to afford this month. If unexpected expenses arise, try to find the money by deleting one of these items or postponing its purchase until the following month.