Over the last few years, double digit unemployment and lack of consumer growth, along with the clamp-down on free money from credit card companies has forced Americans to do something they haven’t had to do in decades: frugal budgeting. A foreign concept for many, frugal budgeting has become fashionable again, out of necessity.
People believe budgeting and frugality mean that you must live like a pauper: no fun, no friends, no happiness. A whole generation of Americans, deemed The Greatest Generation, survived war, depression and raised children, attended parties, loved and found happiness.
The key to making frugal budgeting a success is to get in the mindset that it’s not a punishment, and “denial” doesn’t mean giving up happiness. It just means, gasp, for the first time in a long time, we have to live within our means. You can do that.
The second key to frugal budgeting is to know that it’s an evolving animal. What you list at first may be realistic. You will have to tweak it constantly, at least initially. If you make a budget that’s too restrictive, you will fail much like the extremely obese woman will fail to lose weight if her new diet is nothing but grapefruit. You won’t stick with it.
Write it down. If you can work in a spreadsheet, this will be easier, because you can fine tune numbers instantly. There are several online sites that list budget templates. If you get stuck, take a look at those for ideas. (See Resources.)
Income. You’ll have fixed amounts like your salary, as well as variable amounts that come from bonuses, side/freelance work and gifts. It’s best you consider just your salary only, so list the variable income to the side, knowing it’s your wiggle room.)
TOTAL INCOME
Expenses. For now, you want to plug in numbers as they exist now. Be honest, leaving nothing out. Don’t forget the morning coffee and the weekly bowling league (falling into the categories of dining out and entertainment).
Pull your bills. Until you write down the monthly amounts of your bills, you may not recognize that you are overpaying for a service, or that there is room to save money by cutting back on non-essential items.
Use broad categories for your spreadsheet (or list). These will vary depending on your stage at life. You may want to add a separate line for the subcategories to get that accurate picture of the spending.
Some bills are paid weekly (even daily), others weekly or monthly. Make three columns: Weekly (to reflect what comes out of your paycheck and from which category), Monthly and Annually.
Here are some proposed categories:
Animals
Auto (insurance, gas maintenance, auto payment)
Cable (if your cable bill is a bundle of services such as telephone, Internet, Cable TV, list separately);
Computer (Internet and other services);
Clothing (shoes, repairs, accessories, clothing, uniforms, dry cleaning);
Credit Cards (list separately);
Dental (don’t forget to include insurance taken directly from your check;)
Dining Out/Entertainment (restaurant, fast food, morning coffee, movies, bowling);
Gas & Electric;
Groceries (list pet food under animals and over the counter meds under medical);
Home (association dues, mortgage, insurance, lawn, maintenance, pool, repairs, replacements. If you know you will spend $1,000 on a refrigerator this year, break the amount down over the months. In essence you will be saving along the way.
Insurance (life, jewelry);
Medical (RX, doctor visits, over the counter meds);
Personal Hygiene (hair, nails);
Savings (passbook, emergency, 401k);
School (tuition, activities);
Taxes;
Telephone (separate land line from cell phone);
Travel
TOTAL EXPENSES (Add up the columns to see what you spend, weekly, monthly, annually.)
Deduct the Total Expenses from Total Earnings. This is your current budget. This is a current reflection of your spending. This is your starting point, and it probably hurts to look at it, but until you realize where you may be hemorrhaging money from, you can’t fix it. Let the numbers sink in. Most people think they need more money, always, but if you look at the categories, odds are you will identify problem spots immediately.
Now the fun begins! The INCOME Must Match the EXPENSES. Rework the numbers with an eye towards budgeting to make that happen.
If you don't know how to make a spreadsheet of Income/Expenses, the Internet has several sources of premade budget forms. Use these, adapt them for your needs or create one from scratch
http://office.microsoft.com/en-us/templates/tc062062791033.aspx
http://www.christianpf.com/10-free-household-budget-spreadsheets/
The conclusion to this is in the post: Frugal Factoids: Frugal Budgeting, Time to Rework the Budget is in the works.
No comments:
Post a Comment