Every year at this time, Americans talk about their New Year’s resolutions for the upcoming year. Many people have a resolution surrounding finances, whether it be to save more, get out of debt, spend less or start a college savings plan. Whatever it may be for you, the first step in any of those cases is to find out how much money is available to make that resolution a reality. That is where a household budget fits in.
If you’ve created a budget, you know exactly how much money you have coming in and how much is going out. If you don’t have a budget, you probably don’t have a very good picture of your finances, and you may be tempted to borrow more money rather than squeezing all you can from your income.
Creating a budget can be a daunting and frustrating task. When you begin to work on a budget, flaws are exposed and you start to see how you have either mismanaged what God has given you or that you are better off than you thought, but the key is to you know where your starting point is.
Below is a short list of tips to help prepare and implement a budget. Revisit these tips as you put your budget into practice.
Share the responsibility.
Make sure you are not the only member of your household concerned about your budget. If you are working hard to save money, but your spouse is pushing you into debt, you are fighting an uphill battle. If you are married, sit down with your spouse, and make a plan to determine how much spending money you should each have. Then, check in every week to see how well you are doing. If you are single, try to find an accountability partner who also wants to stick to a budget.
Remember that life is unpredictable, and things happen that are out of our control. When you make a budget, try to allow some extra money for variable expenses. And, be gentle with yourself if you go over your budget sometimes. It can be hard to get back on track if you let yourself get too frustrated over a mistake or two.
Balance your checkbook.
Do you balance your checkbook regularly? If not, it’s a good habit to start. If you are on a tight budget, a couple of small mistakes can lead to overdraft charges and insufficient funds in your account.
Stay focused on savings.
Determine an amount you can save each month. Have it deposited directly to your savings account or mutual fund. Make sure you save something every month. That savings will make a big difference for you later.
Analyze your spending.
Look through your budget and all your receipts. Can you find an expense that can be cut? Maybe you could bring your lunch to work twice a week or set up a carpool with coworkers. Just cutting out restaurant and gas costs can help increase the amount of money you have available for savings and purchases. Look at necessities to survive and keep your house running versus wants and luxuries such as energy drinks, cable TV, cars, dining out and even cell phones.
Take out enough cash to last one week at a time. Make up your mind that the cash you have is all you get for discretionary expenses, or things that you could live without, each week. It’s much easier to turn down a $60 pair of shoes when it will take the last of your week’s cash than it is when you just have to swipe a credit card. You can never overspend cash.
Pay down debt.
If you have credit card debt, you may feel like it’s going to take forever to pay it off. But you can get ahead by choosing one card – ideally the one with the highest interest rate – and paying as much as you can on it every month. If you have other cards, pay the minimum balance on those until you’ve paid off the first card. Then, choose the next card and pay extra on it while you pay minimums on the others.
Make sure you update your budget regularly, and prioritize your spending. Know what is important enough to be worth your hard-earned money. Budgeting will come more easily the longer you stay with it, and you will reap the rewards in years to come. Staying on budget can make your entire life run more smoothly, since so many things are affected by your financial status.
God wants peace and unity in your home, and the best way to start off 2009 is to prepare and implement a budget.
Matt Weissman is the tax manager at Laudadio and Associates, PA, Certified Public Accountants.