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