The Balancing Act of Budgeting
by Michelle Jones
Budgeting is kind of like balancing your checkbook, but not quite as
simple. There must be enough coming in, to cover what's going out. If
your list of expenditures totals more than your income, you're headed
for trouble.
Sure
you can make up the difference with bank loans and those little
plastic cards for a while, but it may turn out to be a horrendous
mistake if things don't go as good as you hope they will. When someone
gets sick, loses a job, or worse, what will you do then?
If
things are going well, get your budget balanced now, while it's easy.
But if things are already a big mess, it's never too late to get them
straightened out, it's just going to take longer and be more
difficult.
Moving down is never as easy as moving up, but the sooner you get your
finances in order the sooner you will have a better life. I'm not
saying you can't have a good life with a mound of debt on your
shoulders, in fact, depending on what kind of debt you have, you may
be living quite the high life already. But, when you sit down to pay
your bills, when you see those debt balances rising, how good are you
feeling then?
You
don't need an expensive computer program or an accountant to create a
budget, all you need is a pencil with a good eraser, a few lined or
green column sheets of paper, and a simple calculator.
Creating a Balanced Budget
*
Make a list of your monthly bills and basic needs such as housing,
utilities, household groceries, prescriptions and gasoline for the
car. Go ahead and add these up, you should have a surplus when
comparing this total to your monthly income.
*
Now, make a list of your extra expenses for everything else, such as
insurance, medical co-payments, car repairs, vacations, gifts,
clothing, eating out, etc. Are we doing okay? Still have a surplus? If
so, great! If not, don't panic. It's probably been this way for a
while; you just weren't looking at it in harsh black and white print.
- And here's the balancing act, your outgo must not exceed your
income, so if it already does you've got to get to work to bring
your expenses down as soon as possible. What would happen if your
checkbook were short? It's just as bad for your budget to be short,
but worse because the bank doesn't send you a notice, your debts
just silently rise higher and higher making up the difference until
you're over your head and have no way of paying them off.
- After you've written down all of your bills, basic needs, and extra
expenses, how's your total look now? Compare the total amount to
your income. Is there a cushion after the bills are paid? Is there
nothing left, or worse? Whichever the case may be, write this figure
at the top of the page with a bold heading... "Surplus" or "Short"
If
you have a surplus make sure you are investing it wisely, and not just
letting it sit in the bank. Three great books that I recommend are:
Investing For The Future, by Larry Burkett, Investing for Dummies by
Eric Tyson, and The Wall Street Journal Guide to Understanding Money &
Investing, by Kenneth M. Morris, et al. You can find all of these on
my recommended book list
If
your budget is short (in the red), sit down and study it thoroughly.
Here's a list of what you can do next to balance your budget...
- See if any of the items can be cut back. If you've already cut back
as far as you can go, look again, there may be one or two more
things you can cut back a little further. Bring your lunch to work.
Have a picnic for the kids with a packed lunch instead of a trip to
McDonald's. And when you do have to order out, always order water,
it's still free in most places. Learn how to cut your family's hair,
or even grow yours out so you don't need a cut as often.
- Spend less money on groceries, shop as frugally as possible, use
coupons, forget the name brands unless they are on sale for less
than the store brand, and shop at several different stores to
purchase the sale items. Eat what's on sale, not what's on your
menu.
- Cut out all additional and unnecessary spending.
- Cancel the cable, newspaper, and magazine subscriptions (you can get
a refund for the remaining issues)
- Borrow new magazines, books and CDs from friends or your local
library instead.
- If
you have debts, pay them off as quickly as possible; this will
instantly create more income every month.
- Have a garage sale or try selling a few things at consignment shops,
especially for children's items, expensive clothing, and accessories
if you have them.
- Let your friends and family know you're having to tighten your
budget and need to forego gifts temporarily, it's likely they've
experienced a few difficult times themselves and will be very
understanding of your situation.
- Maybe you can get by with one car instead of two for a while,
especially if you're currently shelling out two car payments. By
doing this you'll also cut your car insurance and upkeep almost in
half.
- Increase your tax exemptions to get your money each month, instead
of waiting for a big refund at the end of the year.
- Downsize to a less expensive house payment.
- Increase your income, but be careful, without a good budget in
place, the additional money coming in will not help.
Examine every expense you have and try to lower it or cut it out all
together. You have your current budget already written out, now you
need to make another page for your 'ideal' budget. I don't mean your
ideal income; I mean your ideal outgo that will create a surplus for
savings.
Once
this ideal budget is written out, you will know exactly where you need
to make adjustments. It may take some time to get your budget
balanced, but the sooner you get started the sooner it will happen.
Michelle Jones, author
of Frugal Family Recipes and Dealing with Debt, is dedicated to helping
families save money and live a better life. She's also a frugal mom of 4
and the Publishing Editor of Living a Better Life: The Free Money-Saving
Tips Ezine. Please visit
www.BetterBudgeting.com to sign up for your free subscription!
Copyright © by Michelle Jones. All rights reserved.
Reprinted with permission.
