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Better than a raise: The smallest thing you can do to make the biggest difference this year

Published: Tuesday, Dec. 10 2013 8:00 a.m. MST

Arthur Moye, a CPA with MBS Accountancy Corporation in Fresno, Calif., was forced into budgeting, he says, back in college.

"I had very little money," he says, "and wondered how I was going to feed myself."

Because his parents had a lot of credit card debt, he says, he was deathly afraid of credit cards and avoided debt at all costs. "I became really good at budgeting," he says.

He also become sensitized to the things that bust budgets — and, as a CPA, sees how people mess up their financial lives.

And it doesn't take long before people are big in debt. A NerdWallet.com analysis finds that the average credit card debt is $15,112, the average mortgage debt is $146,215 and the average student loan debt is $31,240.

The problem is people do not plan for things that happen and can happen on a regular basis — such as needing an oil change or paying auto licensing fees — and put them on their credit cards.

He also sees how people let their expenses surpass their income — no matter what the income.

Four simple rules

Mark Butler, director of outreach for Lehi, Utah-based budgeting software company, You Need A Budget, says there are four basic budgeting rules

The first rule is to give every dollar a job. This means to assign money to things for it to do — such as pay a bill, pay down debt, go toward saving for retirement and so forth. It is a focus of looking forward to what it will do — and not as much a focus on what it did.

The second rule is to save for a rainy day. For example, everybody knows that holiday shopping is a big expense. By dividing that expense over a year and putting aside money each month, a person can be ready for the holidays without going into debt.

The third rule is to roll with the punches. This means that nobody is perfect and, even with the best planning, unexpected expenses will crop up. When faced with such expenses, don't panic, just shift from other categories as best you can — cutting here and there.

The fourth rule is to live on last month's income. This breaks the month-to-month problem and reduces the stress of paycheck-to-paycheck living, Butler says. It requires several months of savings to get ahead a month, but when accumulated, Butler says it removes the unknown.

Good money gone

Before he started working at You Need A Budget, Butler really needed a budget. He owned two small software businesses and had cash flowing in. "During my five years of self-employment, I made really good money," he says.

He was also always broke.

"I wasn't following a good method for managing money," he says.

Ultimately, he sold his businesses.

"There was a windfall," he says. "Just enough money to bring my debts close to zero."

On a fluke, Butler decided to try the You Need A Budget software. "The commitment to start budgeting," he says, "was a commitment to deal with reality. You begin to deal with the truth, and when you deal with the truth you make better decisions."

Butler says that even though he is now making much less, he is much happier.

"Budgeting is freedom," he says.

It also helps keep him on the budgeting bandwagon that a month after he started using the software, he got a job at the company.

Easier ways to start

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