How to Budget Your Money

Let’s face it, our economy is declining. We’ve all felt the brunt of it. Prices are constantly going up, but paychecks are staying the same, or in some cases going down. So how do we continue to survive? By budgeting our money and living within our means. This may require giving up some luxuries that we’re used to, or finding new ways to supplement our income. It might be hard work for many people, but in most cases, it must be done!

To create a budget, you must write down all of your expenses. Anything that you’re spending money on in any given month, you have to write it down. Here’s an example of a monthly budget:

• Rent: $500
• Power: $200
• Phone: $30
• Internet: $30
• Cable: $50
• Car Payment: $100
• Insurance: $100
• Debt: $100 (this can include credit cards or anything that may be in collections, student loans, old bills, etc etc)

Add any sort of monthly bill you have on there, and the cost. Don’t forget to include your gas and grocery bills for the month. Certain things may vary from month to month, so just right down an average. Take some time to ensure you haven’t forgetten anything, then add it all up to discover your total monthly expenses.

Now write down your monthly income. Include all income you recieve such as from work, SSI, child support, alimony, etc etc. Subtract your expenses from your income. If you’re like most people, you’ve probably ended up in the negative. If you haven’t, then you’re doing great. What you have left over after your expenses is your “free” money. This money can be spent however you see fit, you can put it into savings or spend it on fun things such as going out or getting fast food. Just be careful not to go over this amount in any given month, otherwise you’re taking money from one of your more important expenses.

If you’ve ended up in the negative, or want to free up some more extra spending cash, then keep reading. Here’s where the hard part begins. Our goal is to give you a positive number after subtracting your expenses from your income, so we have to look at every possible way to do that. The first option is to get more income. The question is how much more do you need or want. Are you eligable for government aid such as food stamps or cash assistance? Can you get free lunch for your kids, or WIC? That will free up a bit of income right there. If you’re not eligable for these programs, you may want to look into getting another job, or a better paying job. That’s not so easy these days, but it’s the first step to living better.

If you can’t find ways of increasing your income, and have exhausted every resource, then our only other option is to reduce our expenses.

Some things can be cut back on, such as cable, phone, insurance. Call your providers and see where you can cut back on your service. Do you really need all the pay channels on your cable bill? Do you need to have call waiting or three way calling on your phone bill? Can you cut insurance to minimal coverage? Can the power company put you on a budget billing plan to save during the more expensive months?  Can you refinance your house or car to get a lower monthly payment? Can you consolidate any of your debts to reduce that monthly payment? Look at every expense, call every company, and find any possible solution to bringing down the payments.

You can also look into switching providers, or downgrading certain services. If you have cable internet, look into the cost of DSL or even dial up. If you have cable TV, look into the cost of satelite, or vice versa.

If cutting back isn’t an option, or still doesn’t help, then we have to start looking into eliminating expenses. Start with the “extras”. Do you have memberships you don’t use, such as to a gym or movie club? Even if you do use it, can you think of an alternative so you can eliminate that expense, such as working out at home, or borrowing movies from the library? Do you have a cell phone AND a home phone?

Now, it’s time to get into the sacrifices. Cable TV is not a necessity, and can be completely eliminated. Use movies from the local library instead to get your entertainment. The Internet is not a necessity. If you’re making payments on your computer, that is not a necessity. You can use the Internet at the library, and your kids can use it at school. Do you have two vehicles? Sometimes you can cut that down to one. Carpool to and from work, or use public transportation. Eliminate extra cell phones, or find a prepay plan and keep your cell phone for emergency situations only. Stop using your credit cards.

The only bills that are essential for survival are your rent or mortgage, your power, a phone for emergency use, your food, and of course your transportation to and from your job. Anything else can be eliminated if you cannot afford it. Even the essentials can be cut back on, you can find ways to reduce your grocery and power bills if need be.  So look at your expenses and decide what is non-essential and what you can live without, and eliminate it. Cut back on everything that you can, and you should be able to even out your budget.

Once you’ve gotten some “free” money, spend it wisely. Put it into a savings account for emergency situations. Adding more bills just because you have the extra money will only get you back in the negative again, so be cautious. Stick to your budget, it may not be easy, but life will be better when you’re not worrying about how your monthly bills will be paid.