subject: Budgets To Change Your Life [print this page] First things firstFirst things first. Give yourself a budget-attitude shake. A budget is neither a starvation diet nor a binge approach to money management. It's a month-by-month strategic plan to care for yourself, your family, and your future. Once you get good at it, your budget can become longer term-some people actually have 5-, 10-, 15-year plans, and more-and peace of mind about their future. You can too.
What a budget can do " A budget can be a real wake-up call about your finances. " A budget can tell you what you can really afford, based on how much money you actually make-without lines of credit, plastic, in-store accounts, or other "false" income extenders. " A budget can help you prepare for unexpected surprises-a furnace breakdown in February, or dental emergency in July. " Eventually, a budget can even help you plan big purchases-a home, vacation, children's education, and your retirement.
What a budget cannot do
" A budget cannot change how much money you really make. And if you've never actually compared what you make to what you spend, the reality may be harsh. That 20x30 back deck you were planning to build this spring? It might be more realistic as an 8x12-get the drift?
How to begin
Start with pen and paper. No fancy accounting books or computer programs needed.
Next step
Make two columns. Call one "Fixed costs", the other, "Variable costs". Variable costs are ones you can change (as in, spend less)-groceries, liquor, and entertainment. Fixed costs you usually have no control over-like rent and car payments. (Even those costs might be adjustable-don't dismiss moving for cheaper rent or selling a vehicle.) Don't count fixed costs if they aren't. Seriously, how many phones do you need? Basic cable is much cheaper than premium, and beer is not a mandatory food group.
Under one of the two columns, write everything you spend money on each month-groceries, gas, car payments, credit cards, mortgage/rent, phones, television/cable. Add it up. Stay calm. Now write down your income sources, and tally them. Subtract Fixed/Variable costs from your income. Seeing red?
Sharpen your pencil This is budgeting-choosing how you'll spend your money. The quickest way to save big bucks is with entertainment, liquor, and groceries. Control those costs by deciding how much you can actually afford. Put those new amounts into your column. Re-tally. Seeing more black?
Tips to control spending
Sometimes you're so cash strapped, you have to eliminate things-find freebies instead-the library, instead of the movies, the park instead of the mall.
Always buy with cash
From now on, always buy with cash. Melt your credit and debit cards, and close all lines of credit. When you get paid, go to the bank and withdraw the money allotted to variables for that week, and put it into labeled envelopes. When you take out cash to buy those things, put the receipts into the envelope. This way you see where your money goes, and can make a really conscious choice next month about whether you want to spend your hard-earned paycheque that way.
Surprise cash pockets
Don't squander surprise cash pockets. Every June, after Tax Freedom Day, your paycheque actually jumps a bit-ever notice? From now on, that extra jump is going to be put towards debts, not frittered away. Your income tax return-usually blow it? No more. Pay down debts, highest interest first.
Re-budget and fine tune
It takes time to get budgeting right. But a budget can help you feel like you're finally in the driver's seat of your life.
by: Molly Wider
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