Now, let’s take a look at how a budget should work and see if we can get out of this ‘living paycheck to paycheck’ syndrome. And as it is with many big accomplishments in life, what you need is, a plan!
Making a Plan
Assess Income and Expenses – Write Out a Budget
Whether you write your budget out on a ledger or sheet of notebook paper, or better yet use personal money management software such as Money Plus Deluxeor Quicken 2008 Deluxe(I have personally used these, they are exellent), just make sure your outgoings do not exceed your income. If it does, continue working each month to make the numbers match up better, making changes to your income or lifestyle as best you can.
Create a Schedule for Paying Bills
Second to sizing down our home 4 years ago, this has been the most helpful self-imposed detail for our own family budget. I keep each month broken down into our bi-weekly paychecks, and designate which paycheck pays which bills. When extra money comes in or when the bills are less than expected, I use those opportunities to get ahead. I adjust the budget and move bills from one paycheck to an earlier one, meaning I now basically have the money to pay all of our bills long before they are due.
Reduce Debts
This one’s a no-brainer, get those debts paid off the best you can, as quick as you can. One of the best ways to do this is to make a list of your debts and start paying off the smallest balance first, then the next smallest and so on. (See further detail in the debt reduction section). Each time you get a debt paid off take the money you would have paid on that and put it towards the next one you’re working on. And meanwhile, try your best not to accumulate any more debt.
For some great ways to reduce your debts, Visit
Reduce Spending – Keep Track of Daily Expenditure
If you’ve made a list of all your spending for the last 30 days as I suggested earlier, then you’re off to a great start. You should have a rough idea of how much you’re spending each month and what you’re spending it on. Make adjustments to your budget if needed or reduce your spending. If you’re still unsure where all your money is going or feel that it may fluctuate from month to month, keep a tracking list for 90 days and then figure the averages. See the example figure below.
Month
Item
Amount
January
Mary’s Lunches
$ 30.00
February
Mary’s Lunches
$ 50.00
March
Mary’s Lunches
$ 20.00
Totals
-
$100.00
To figure the average monthly spending for each item, take the total amount (in the example above this would be $100), and divide by 3. Thus Mary’s average spending for lunches will be approximately $33 per month and this is what she should budget for.
Reduce Monthly Bills - Size Down if Necessary
You never know, you may think you’ve cut every extra expense that can go, but there are usually a few more expenses that can be cut. It may also help to think of these cut-backs as temporary, for they usually are.
Ration Monthly Income – Save as Much as You Can
When you create your budget, of course you’ll need to ration your monthly income to cover all of your expenses (housing, utilities, bills, doctor visits, gas, food, haircuts, clothing, etc…), but don’t forget to add a section for savings into your budget, based on your income. If you’re unable to save even $5-10 a month then make it a goal to start as soon as possible. Once you’re able to start building a savings account you can begin investing and earning interest on your money… instead of paying interest on your debts. (Be sure to pay off most of your debts first, especially those with high interest rates.)
Increased Income
If earning more income is an option for you then go for it. Just remember to have a plan for where that extra money is going to go because if you don’t, it could be just another paycheck that disappears. Any additional income generated should be channelled towards paying down debt before anything else.
Maintain Your Budget
After you’ve made your budget and financial plan, make a commitment to stick to it as much as possible.
Re-evaluate Your Budget as Needed
Life is always changing, and your budget will undoubtedly change along with it. I recommend re-evaluating your budget every quarter or at least yearly.
Be Generous
It may sound crazy, especially if you have extremely limited funds, but as many of you already know, it is truly more blessed to give than it is to receive. And there are many ways to be generous besides writing a check, even just sharing a meal with a neighbour who’s under the weather can be more important than any amount of money they could possibly have. You may feel you can't afford to do anything, but life will surprise you.
So lets make our plans, stick to our budgets, and keep our eyes and ears open for how we can always be generous… that’s living a better life!
(I have personally used these, they are exellent)
