If you’re like me, your idea of a budget is to hold onto the receipt after you pump gas with the noble intention of “doing something with it” later. Six months later, all you have is a wallet filled with gas receipts (and restaurants, and stores, and everything else that you bought and had intentions of recording). In the same vein, your idea of balancing a check book is to hold it delicately on one finger, and you think “mutual funds” means everybody is having a good time.
Well, you have to do better than that or you are going to be in for a rude awakening. Proper money management is the cornerstone of any successful household or business. Knowing where the money is going and making sure that there is less going out than there is coming in is definitely a talent to be acquired and refined.
The first step in the process is to write down and account for everything you spend in a given month. This will show you where necessary expenditures are as well as those that you could effectively cut back on. After my separation I found myself having to make do with a lot less; I used to like to eat out a lot, so imagine my surprise when eating out accounted for roughly one fourth of my take home pay. Talk about an eye opener. That stark realization made it much easier to roll back my trips out to one a week.
Once you have expenses in hand, write down the ones that are set in stone, the ones that will not fluctuate from month to month such as mortgage, car payment, etc. See what you have left over. If you pay your car insurance every six months, arrange to have it taken out in monthly installments so you don’t run the risk of being surprised or caught unprepared twice a year.
When it comes to variable expenses, such as electricity or gas, look for ways to manage those, such as keeping lights turned off in rooms that are not in use, opening windows on comfortable days to avoid running air conditioning or heat, etc. Make a detailed grocery list, as that will do far more for keeping expenses down than just roaming through the aisles picking up whatever strikes your fancy.
Determine what you have been spending in given areas, and then determine how much you would ideally like to spend in those same areas. Putting it down on paper makes it “real”, because it is awfully hard to argue with figures. Obviously the place you have the most flexibility is in the areas where monthly payments fluctuate, such as groceries. If you spent an average of $175 a week on groceries and you’d like to keep that figure at or below $150, look for ways to buy less, or adopt the fine art of coupon shopping, or look for foods that routinely go uneaten and quit stocking them.
If possible, create a spread sheet that records your expenses, as this will enable you to see what you are doing from month to month, and if you are indeed meeting your goals. The first few months may be iffy, and you may be disappointed in yourself, but don’t give up. The more you strive to adhere to the guidelines you have set forth, the easier it will become.
The idea behind a budget is to make your money work for you, not the other way around. Becoming a slave to your finances, living month to month and worrying about whether or not you are going to make ends meet, is no way to live your life. With financial freedom comes the ability to enjoy life to the fullest, knowing that your responsibilities are taken care of and that at the end of the day, you have a few bucks left over to do with as you will (but if you’re smart, you’ll sock it away for future use). Remember, just because you have money doesn’t necessarily follow that you have to spend said money.
Don’t worry, this isn’t rocket science, or quantum physics, it’s not even advanced algebra. It’s just a series of common sense steps designed to help you get a hold of your finances and put them to work for you in their proper place.
Now go therefore and spend wisely…..