subject: Live On What You Earn: The Art Of Personal Finance [print this page] Budget is a word that puts fear into the heart of most of us. It's like saying diet. It leaves a bad taste in our mouth like a stock of celery on week two of "The Plan". However, a budget is simply a plan. We make plans for holidays and birthday parties and many other fun activities. By planning how much to spend and save, we can in the end have more fun. It takes discipline, but the goal, like a shrinking waistline is worth the effort.
To begin to get control of day-to-day spending, begin by journaling one month's expenditures. Don't change your spending habits; just jot them down for one month. Afterwards, examine your list. Highlight the necessities and the nonessentials. Now, comes the tougher part, identify nonessential expenses that you would like to decrease. Often, just seeing how much is spent without awareness of the amount of outflow is enough to jump start you on your way to increasing your cash flow by trimming a little to begin with and create new budgets, in increments, to get to your overall goals. Allow yourself to keep some of the little extras you enjoy so that your budget is realistic and not a burden. Also, think in terms of perfecting your budget over the course of several months so that you will not feel the uncomfortable limitations of too drastic a change to your lifestyle. You want the budget to work for you over the long term.
To begin, let's establish a base to guide you through the second and third month by pinpointing a few areas where expenses could be cut:
1. After you have established what you spend each month, divide the total into an average weekly expense. Reduce this figure a bit, say 5%, and set this amount aside. Use this extra money for the nonessentials that will occur over the next month. When this fund is gone, don't spend anymore on nonessentials. It may be tough to do at first, but you will begin to feel better about your overall financial situation as you successfully repeat this process each month.
2. How much do you eat out every week? Make a new plan for your eating future, involving eating out less. Make a schedule that you can easily follow.
3. Head straight for the clearance racks when you are shopping. Then check out the sales racks. Only buy things that are on sale. Periodically check out the clearance areas of your favorite stores. Accumulate your wardrobe one piece at a time, buying items at a discount instead of purchasing an entire outfit at once.
4. Spend some time comparing prices for things like utilities, such as the telephone, cable or satellite service, trash pickup; check out terms and rates available from credit card providers; and shop around for the best deals, keeping in mind that bonuses may be available to you if you're willing to switch.
5. Withdrawing cash from only your bank's ATM will save you the extra fees that you would pay when withdrawing at bank's other than your own.
6. To discourage impulse spending, list the items you intend to purchase before you go shopping. Force yourself not to deviate from that list! Keep in mind the comforting thoughts that you will save money this way and that you can always purchase additional items next time you shop.
You should remember that you can reduce stress in budgeting by knowing where you are spending money right now. Allow yourself a few luxuries, but don't go overboard. The purpose of a budget is to work in the long term, so you should evaluate your budget every four or five months to keep it in check. If done correctly, a budget can create a new lifestyle with less wasteful spending and produce more cash flow.
by: Phil Rogers
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