The popular text BFF (best friends forever) has gone out the window during these tough economic times and has been replaced with a new acronym, BYF (Budget Your Funds).
More and more people are learning the hard way that their money isn’t going as far as it used to, and free time that used to be spent in a leisure fashion, perhaps texting their buddies, is now spent pulling out hair trying to figure new ways to stretch those payroll dollars.
I, myself, am a student of the old school. I grew up hearing my mom and step-dad say, over and over again, don’t spend what you don’t have! They were a very anti credit card.
Their recipe for a healthy bank account was simple: do not let your expenditures exceed your income! Sounds way too simple, right? But it is possible to keep your account in the black.
It takes a certain amount of self-discipline that must be exercised like every other muscle in your body. Don’t let that mental muscle atrophy. Work it!
First, make a list of your monthly bills. It helps to purchase a simple notebook (the kind you used for notes in school; a simple spiral-bound notebook).
They cost around $1.00 at your local grocery store.
Use a page for each month. In the current or upcoming month, list all your fixed bills; the ones that don’t change from month to month like mortgage/rent, cable/satellite, phone/cell/internet, auto/auto insurance, etc.
Satellite TV: 71.92
Auto Ins: 99.18
Notice that the x’s indicate bills that vary each month. Those will be written once you receive the bill and know what that expenditure will be for that month.
Make this list your template for each month in your ledger. Keep your ledger on your desk or wherever it is that you sit to pay your monthly bills.
Keep a calculator on hand to help prevent simple mistakes in adding and subtracting.
Believe me, it can happen!
I tutor math, and still occasionally make a simple error subtracting.
Out to the right; write your total monthly income. Leave a space underneath to write your total outgoing bills. Some bills may be credit card payments.
It’s best to save writing in their amounts until the end after you’ve added up all fixed and necessary bills such as rent, water, electric, auto, auto insurance…the ones you absolutely must pay first!
Once you’ve added these amounts, you can subtract them from your incoming funds to see what is leftover.
The amount left over will determine what you can spend on groceries, gas, miscellaneous, and credit card payments. Go to credit card payments first to mark down the amount you will be paying.
Always pay at least the minimum, but a good rule of thumb (one that will help you pay down your debt quickly without incurring more debt through interest) is to pay double the indicated amount due. That may be easier said than done for many so try to go at least $50 above the minimum.
Be diligent about paying off credit cards! If you know you have earned enough to pay extra each month, do it! I purchased a digital camcorder (a nice one) and made sure to pay $100 each month although the minimum payment due was only $20.00.
I was able to pay off my purchase quickly, maintain good credit, all without paying much over the actual purchase price.
Remember that when you charge something on a credit card, the interest just keeps building, and if you pay only the minimum each month, you’ll end up paying for that one item five times over. Why would you want to do that?
Rent: $800 Incoming: $2,500.00
Water: x Outgoing: -1,641.23
Satellite TV: 71.92 Remaining: 858.77(pad)
Auto Ins: 99.18 Savings: 100.00
Groceries: x Remaining: 758.77 (pad)
Now, it’s important to figure enough funds leftover (discretionary funds) after buying groceries (use coupons!!!), and allotting cash for gas, to designate as miscellaneous funds.
This does not have to be a large amount, but you should always leave some money in your account. If you happen to be lucky enough to have a semi-substantial amount left over, slide $50 to $100 into your savings account and forget about it!
If you can follow this example, you’ll be able to see exactly where your money goes each month.
If you find that prior to this, you struggled each month to have a dollar in your pocket, but see clearly that you do have enough money to not only pay your bills but put some towards savings each month, then you must RE-EVALUATE your spending habits.
Are you eating out at restaurants daily? Do you make unplanned or unnecessary purchases? Are you going out every weekend and spending your money on drinks and entertainment?
These are the common errors made by just about everyone when it comes to budgeting your income.
You will have to learn to allow a single amount as payment to yourself each month, and not exceed that amount to be used for fun/entertainment.
Make sure to give that money to yourself in cash to avoid over-drafting your bank account with a debit card since many folks fail to write down debts to keep track.
So now that we’ve touched on a great way to keep track of your budget, let’s look at ways to save on usual household monthly bills.
In the list provided above, you don’t have much room to maneuver to cut back expenses, but there IS room. Starting with the internet/phone, look at what you’re spending and who is your provider.
Can you get them to re-work your bill under a new promotional plan? Often, you can! Give them a call, tell them you are looking to cut back on expenses and would like to see if they are offering a less expensive option.
Companies value your business and will usually work with you to keep you as a customer. Do the same with your Satellite TV or cable provider. Do you really need ALL those channels or could you cut a few backs?
Opt for a less expensive package for a savings of up to $30 a month. What about your auto payment? Can you find a bank or credit union willing to purchase your loan under a lower APR?
If so, you could knock $50 – $100 off your monthly car payment. And don’t forget to shop around for the best price on auto insurance. These savings take only a small amount of time, and a few phone calls to accomplish.
Let’s look at your credit cards. Are you more than $5000 in debt?
If so, you could qualify for help through a credit counseling program.
By doing this, you can stop juggling your credit card payments, maintain, and even improve your credit rating, and pay off those pesky debts before they avalanche on top of your head!
I did this myself years back, and let me tell you, it was the best feeling in the world when I got down to those last few payments! My credit rating went up by more than 100 points. It’s worth it.
So you can see that I speak from experience as one who sometimes didn’t listen to the good advice of my parents.
Now, I impart these words of wisdom to you, dear reader. Before you find yourself struggling, start managing your budget using these simple steps.
If you are already experiencing hard times, get on top of it immediately by incorporating the notebook, and finding ways to reduce your outgoing debt per the advice given.
Please believe me, I did the research via my own personal budget and managed to save some good money in the end. It works. It just takes a little of your time and a lot of discipline.
If you don’t have that kind of self-discipline, ask a family member who’s good with managing money to help you.
The habits you learn from these steps will help you beat this economic crunch and will serve you well in life.