Budget Your Way to a Fresh Start

On: By: Administrator

 The fastest way that I know of to get a real fresh start on your financial life is to build a realistic budget and then stick to it!

Let’s face it, living from paycheck to paycheck is stressful, and surprisingly, most people these days live that way.  But you don’t have to.  Not if you’re willing to put a little effort into building a budget and then not just living within your means, but saving a little each payday until you build up an emergency fund.  Your emergency fund can start as low as one hundred dollars.  The important thing is that you start one.  And I guarantee, once you get in the habit of saving a little each week, you’ll want to continue to grow your “emergency fund” until you have a comfortable cushion that you can fall back on the next time you have a financial setback.

So, where do you start with your budget?

First and foremost, you’ll want to sit down with your pay stubs.  Are they all the same or do they vary from week to week?  Do you have overtime pay?  Bonuses?  For the purpose of your normal budget, it’s best to try and calculate it based on your normal, regular take home pay – not those variable amounts such as bonuses and overtime pay because they are not guaranteed earnings.  (And if you don’t count on them, you have the opportunity to save the extra money or even splurge once in a while!)
Next, list any money you have coming in from other sources, such as alimony, child support, or from a part time job.  The key here is normal, regular household income.  That’s the basis of your normal, regular budget.

Once you’ve figured out your income, it’s time to list your expenses!

Start with the expenses that are the same every month (week, quarter, etc.):
  • Housing (rent or mortgage)
  • Insurance premiums
  • Car payment
  • Utilities
  • Child care costs
  • Debt payments (credit cards, personal loans, etc.)
  • Car and home maintenance

Then, list the expenses that you have some control over, that may change from month to month:

  • Groceries
  • Savings
  • Medical costs
  • Monthly fees and subscriptions
  • Gifts  (Christmas, birthday, etc.)
  • Entertainment

For those expenses that fall outside your normal weekly or monthly budget, you’ll want to be sure to set some money aside so that you are able to pay them when the time comes.  For example, if you pay your homeowner’s insurance annually, you’ll need to save a certain amount of money each time that you get paid for your homeowner’s premium.  (Don’t make the mistake of thinking you’ll save for it later or that you’ll come up with it somewhere – you won’t!)

Now, you’ve listed your income and your expenses.  The difference between your income and your expenses is your net gain or loss.  If your income is greater than your expenses, then you can probably save a little more or have a little extra spending money.  But, if your expenses outweigh your income, then you need to be looking for ways to cut corners.  Clip coupons on groceries, cancel the upper tier cable channels, skip dinner out once or twice a month, or if you’re seriously in the hole, you may decide that you need to find a second job or an additional source of income.  Whatever your financial situation – you cannot do anything about it until you’re aware of it!

Don’t just stop with the budget!

Now that you’ve made a budget, and you’re well aware of your true financial situation, don’t just walk away from it.  Pay attention to your spending.  Sit down each and every month and study your receipts.  How does your actual spending compare to your budget?  Are there places where you can cut corners?  And are there places where you underestimated the expenses and need to readjust your numbers?  The more you begin to pay attention to your spending, the more that you’ll notice when you overspend, and you’ll find that you will subconsciously start to live within your means very quickly.

Fortunately, with so many free tools available today, you can easily keep track of your budget on your phone, your laptop, or even with an old fashioned pen and paper.  Whichever way you choose, just be consistent.  Sit down, study your income and your expenses, pay your bills, and start putting back any excess for that emergency fund.  You’ll be surprised by how quickly you can get your finances under control if you just work at it!