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paper money on a scale


"Getting money is like digging with a needle;
spending it is like water soaking into sand."

Japanese Proverb






Budgeting to Live Within Your Means

  • In order to start getting your finances under control, it's a good idea to get the family together and spend an afternoon or so making a budget. We do a master budget about once a year on a spread sheet, keying in all of our planned expenditures for the upcoming year. We then have a reality check and compare what we want to spend with our income. This is a way to plan ahead and confirm that we are living within our means, and it helps us to figure out if we have money for optional expenditures like, a new furniture or a vacation.

    Let the greatest order regulate
    the transactions of your life.
    John McDonough

  • Then we sort the expenses for the upcoming year in descending order. This way we can see where the bulk of our money is going. I know a lot of people who will clip coupons or refrain from buying snacks at the movies, and yet ignore reviewing major expenditures like how much to save for retirement or whether or not to refinance their house. By sorting your expenditures, you can focus the most attention on reducing your biggest expenditures. Though after the big expenditures are reviewed, don't forget to also pay attention to the little expenses. They all add up!

  • The biggest area we can cut back on in our home budget is usually spending too much on food, especially restaurant meals. I work at home on my web sites part-time, so in the evenings I like to get out of the house. The rest of the family has been at school or work all day, so going out isn't as important to them. To compromise, I started getting carry-out for myself at lunch a few days a week and then the family eats at home together in the evening. That way I don't have to eat my own cooking all day, and we still save money.

  • To view what other families with incomes similar to yours are spending, go to the Consumer Expenditure Survey from the U.S. Department of Labor Bureau of Labor Statistics. Their site contains detailed information on the buying habits and expenses of American consumers, broken down into minute detail.

    Using their survey tool to report on their data, I found that the average "consumer unit" in the U.S. spent $3,293 on food away from home in 2003.
    ( By their definition, a consumer unit consists of a husband and wife with children, with the oldest child between the ages of 6 and 17).

  • Some tips when making a household budget -

    1. Try to think of your entire expenses for the upcoming year. Even leaving out $3.00 a day for a latte every day. Including weekends, adds up to leaving off a $1,095 expenditure. Over time, cutting small expenditures from day to day living can really add up.

    2. Remember to include emergency and long term savings as an expense item in your budget. Putting money aside for an emergency fund for potential major expenses that often crop up in everyone's life such as losing a job, replacing a hot water heater or needing a new roof on your house. Also remember to save for long term goals such as retirement and college expenses.

    I see on some of the frugal forums that people view expenditures such as buying new tires for their cars or replacing a aging hot water heater as emergencies. In most cases these really aren't emergencies. They are inevitable expenses many people just don't save enough money towards and their personal finances take a hit.

    3. If you don't know how much to budget for minor cash items like coffee, postage stamps, gum and candy bars, then try recording all of your expenses for a week or two in a notebook in painstaking detail to give you a complete record of how much you are spending on incidental items. You might be surprised at just how much these little expenses can add up!

  • Click here for a budget worksheet to use for your own personal budget.


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