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- Understanding Finance
Making Your Dollar Stretch By Creating a Budget
For most of us the word "budget" is a fun killer. After all, we enjoy spending our money however we desire, whenever we desire, and for whatever we desire. However, with the economy the way it is, more and more of us are required to take a look at our finances so that we can stay afloat. A budget can be a great way to help you make your dollars stretch. Sure, you won't be bringing in more money, but you will have a better idea of where your money is going, how much you have, and where you can afford to spend.
Start With Solid Numbers
Not everything we spend money on is a solid number. For example, the electricity changes from month to month, but the rent or mortgage payment doesn't. Another more flexible number is the food and household budget. While it is true that you need to spend a certain amount on food to feed your family, you do have some control as to how much is spent. So, for setting up a budget you will want to start with solid numbers. Here are some examples that may be on your list. Putting them into a spread sheet can be very helpful. If you don't know how to work a spreadsheet or don't have a program available to use, you can list them on paper.
- House payment (either rent or mortgage).
- Insurances- car, renters, home owners, life insurance, health insurance
- Car payment(s)
- Utilities if you are on a budget plan
- Cable, satellite, and or Internet
- Phone bills- home and or cell
- Credit card payments
- Other debts
This is of course not an exhaustive list, but could be a few of the bills you have each month that you pay a specific amount for. Put these at the top of your budget because they are easiest to plan for and should be things that are on your "have to pay" list.
Move onto the flexible. We have a lot of things that can be more flexible in our lives. These are harder to plan for. However, you should take a look at the seasonal trends that you have and make sure you guesstimate (an estimate with a hint of guess to it) how much you will be paying for the next few months. These should be added to your budget next. They should include your utilities, gas for the car, any repair costs (whether for the house or car), and other flexible, but mandatory costs.
Okay, so here's where most people struggle (I know, I am one of them!). You have in your power a number of things that you can control. This includes food, house hold needs (cleaners, TP, ect), clothing, entertainment, and even eating out. Often it depends on what your vise is as to where you spend a lot of money. If you are like me, I hate cooking and would rather go grab something out. That means I could spend lots of money eating out, but am not likely to go on a shopping spree and spend $150 on new shoes. However, each of these things can be controlled with a few tips. Here are some tips for cutting costs in the different areas, then you should give yourself a number for each category.
- Food- There are a number of tips for cutting food costs. Here are a few of the bests. Never go shopping when hungry, everything will look good and you will end up bringing home way too much. Make out a weekly or bi-weekly meal plan (including snacks) and pick up only what you need. Skip out on a lot of pre-packaged foods and junk foods. These are money hogs and while we like them, can make your food budget soar. Make as much food from scratch (or nearly scratch) as possible. Short on time? Cook foods ahead of time and freeze them for meals you can pull out of the freezer and bake.
- Household- Buy bulk for things like toilet paper and paper towel. Try to get a few items each month and rotate what you are buying. If you buy large packages of everything you aren't going to need everything each and every month. It is also a great idea to start cleaning green because you can make your own cleaners lots less expensive, healthier, and they work just as good (trust me we have been surprised).
- Entertainment- Plan your month's entertainment ahead of time. What are you going to do? Where are you going and how much will it cost? This could mean looking at the movies coming out for the month, figuring out what plays you will see, or what other things you will do. Cut it down to a few things you feel you have to do or see. Then figure out some entertainment that is less expensive or free.
- Eating out- You can put your eating out into your entertainment fund or you can have it separate. Either way, figure out where you are going and how much you are going to spend.
- Other- You can leave your other open or plan out what you are going to spend and then set that money aside.
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Controlling Your Controlable
It is often hard to control your controllable. Even once you have given it a number you aren't supposed to break it is easy to do just that. Here are a few tips to help you control it.
- Cash- For most of us, cash is harder to spend then sliding a card (or even writing a check). Because of this, it is a good idea for most of us to set numbers for each category and then get that money out of the bank in cash. We then separate it out. You can only spend as much cash as you have. (You may need to leave the cards at home).
- Keep Your Check Book Balanced. If you are using your debit card or writing checks make sure you write every transaction down and then balance it. You will know better how much you spend in each category.
- Write it down. Even if you are using a debit card, credit card, or other payment method write down how much you are spending and from which category.
It is important to keep to the method that works best for you so that you can keep an eye on spending. It is also important that you follow one golden rule:
Don't put it on the credit card and call it "free". You don't want to rack up more debt, so unless you have an emergency (a real one like the car dying) then keep things off the credit card unless you are paying it off at the end of each month--just don't do it!
Saving isn't easy, but it is important. It is a good idea to try and set aside some money each and every month even if it is only a little bit each and every month. This can be used in the future for emergencies, vacations, and even bigger and better things (you save a lot of money on both cars and houses with bigger down payments!).
Money is hard to handle. We tend to enjoy spending it and struggle to keep it. Setting a budget can be the best thing that you do for your money. You can get control of your spending. See where you are spending too much and figure out how to make changes that will fit your needs and wants, while making your life better. With the economy the way it is...it is never too late to get control!