Tips To Help Balance Your Budget
The very first step of of balancing your household budget and getting out of the "red" back into the "black" is by taking an inventory of where your money needs to go verses what you want to spend things on:
At the top of a sheet of paper, write down how much your bring in for a given month. In my example (for easy numbers) I will say Bob's family brings in $2,500 each month after taxes.
Next, you are going to write a list of all of the things that NEED to be paid: (Again, I'll use "Bob" as an example)
- Mortgage (or rent) $1,200
- Electric bill $100
- Water bill $50
- Natural Gas $50
- Phone & Internet $100
- Cell phone $100
- Garbage $25
- Car Payment $300
- Groceries $500
- Gas to get to work and back $200
The total expenses = $2,625
As you can see here, Bob spends more than he earns! He needs to find a way to cut $125 off of his "needs" in order to break even!
What do you consider a "need"?
Is a cell phone a need? Maybe, it depends upon what you use it for.
Someone who does freelance landscaping needs their phone so that clients can get a hold of him whenever and wherever he may be. In this case, as it is work related, it is a need.
Someone who uses it to keep up with their online social network, to text to friends about what the neighbor is doing, or to tell their friend about a great shoe sale they just came across; no, the cell phone is not a "need". It is a luxury "want".
- a place to live
- natural gas to run "gas" appliances
- the convenience of a cell phone
- the entertainment of 300 cable or dish channels
- the prestige of a brand new vehicle
- the luxury of name brand clothes
- the flavor and variety of name brand foods
It is important to understand the difference of a need and a want. If you are in a position like Bob, you'll need to find a way to trim your corners until you can earn more money.
Cut your costs:
Even when working with "needs" there are ways to trim the budget in order to get back on track.
- Make a conscious effort to save on electric and water use to lower your monthly bill
- Menu plan, coupon shop, and buy store brand foods to lower your grocery bill
- Consider buying a used car outright with your tax returns, rather than making a monthly car payment
- Determine whether or not you actually need the cell phone, cable access, or higher octane fuel at the pump
- If you have a credit card, stop using it. Switch to a debit card or bank card to lower and/or eliminate the high interest rates. Cut up that credit card, pay it off, and don't get a new one!
If you stop off and get a cup of coffee at the gas station every morning, STOP! Make your own coffee at home. It will save you hundreds of dollars over the course of a year.
If you eat out for lunch, STOP! Make your own lunch at home and bring it to work. Again, this will save you hundreds of dollars!
There are literally hundreds of ways to cut costs, too many to mention in this article alone. Take a serious look at your lifestyle and determine what you can do to cut costs in your own life so that you can get back into living within your budget without feeling that you are giving up your freedom.
Earn Extra Money
Another way to get your budget back on track is to supplement your income. This can be done in as many ways as your willingness and imagination can devise. A few examples are:
- Have a garage sale
- Get paid to mow your neighbor's yard
- House-sit for someone
- Pet-sit for someone
- Start a weekend dog walking service
- Learn to read Tarot Cards and market your service
- Write articles online
- Sell items on Itsy or Ebay
- Collect cans and recycle them
You get the idea.
Earning extra money isn't about replacing your current income. It isn't about quitting your day job. Earning extra money is a way for you to balance out what you spend verses what you make. When you find that you are falling behind on bills and faced with choosing which one gets paid over which one is going to be late, making some quick money with a garage sale or holding a booth at the local flea market to sell something you happen to be crafty at making can really do wonders for staying on track.
Putting it All Together:
Let's take another look at Bob's financial situation after he applies some of these tips:
Bob has decided that he is going to work really hard at saving on electricity and water. He has also found a buddy to ride-share with for work. They take turns, which cuts the gas cost of getting to work in half for him. Bob has become a more thrifty grocery shopper (or his wife has). Without adding any of the other "extra income" tips to his plan, let's see how his budget has changed:
Total monthly income for Bob's family $2,500
- Mortgage $1,200
- Electric $90
- Water $45
- Natural Gas $45
- Phone & Internet $100
- Cell Phone $100
- Garbage $25
- Car payment $300
- Groceries $400
- Gas to get to work $125
His total expenses now are: $2,430
Bob didn't have to give up very much at all in order to accomplish this. He and his family just became more conscious and aware of how they used what they already had. Now he does have enough to cover all of his bills with a little left over.
He can choose to save it, spend it on special occasions, or pay back the debts that he owes on. That extra $70 each month means the difference between living in the "black" and living in the "red".
Just imagine what Bob and his family could do if they started using some of the suggestions to earn extra money, or if he sold his car and bought one outright to eliminate that $300 per month payment he is making! Bob and his family would be out of debt in no time, with money to spare!
I am aware that not all expenses were listed in this article.
Bob is a completely fictional character. This was an example to help you gain a better understanding of the breakdown of household financing.
The amounts listed under expenses may not be accurate for everyone. Again, they were an example based amount for illustration purposes only.
Thank you for taking the time to read this article. I hope it has given you some helpful insight as to how you and your family can apply some of this information to your own lives to achieve a more balanced budget.