When I was in high school, we learned the proper way to write checks. They don’t teach that anymore. They also don’t teach how to budget, and it is something everyone should know how to do. When we properly budget our money, it allows us to save, plan for retirement, our children’s college education, really anything you want to spend money on it is just a matter of proper budgeting.
So what is the proper way to create a budget? If you have something like MS Money or Quicken on your computer, they have built in programs to help you do that. In this age of technology and the internet, you could use your internet search engine and probably get thousands of hits on programs that will automatically create a budget for you, all you have to do is answer the questions and at the end, the program generates a budget based on your answers. Depending on the program, you can make manual adjustments to what was generated.
However, just like we still need to learn basic math and English skills because we can’t rely on modern technology to do everything for us, it is a good idea to have an idea of how to create a budget on your own, even you do use your computer and a program like Microsoft Excel to help make it.
Needless to say, the first thing you need to create a budget is your income and expenses. If your income fluctuates, base your income on the minimum base you will get over the course of a month. Doing it that way, you may end up with extra money, but it is always better to have more money than you budgeted for than not enough. If you have a regular income each pay period, but sometimes get overtime, don’t include the overtime in your income just yet.
Ok, so now you know the minimum amount of money you can expect to have each month, so it’s time to look at your expenses. First, list all of your fixed expenses, things like rent, car payments, insurance, anything that remains the same each month. Hopefully, when you have added these things up, it is still less than your total monthly income.
Next, you will want to list necessities; things that you must have, but how much you spend can fluctuate or you have some control over. This would be things like utilities and groceries. A note on your utility costs: many utility companies offer budget payments. They calculate how much you spent on the particular utility (think electric, gas, heating oil), and then they figure out a monthly payment that doesn’t fluctuate. One very important thing to be careful with this is that if you use more than the budgeted amount, at one point during the year, the utility company is going to want you to pay the outstanding balance, so your goal is to stay under budget. Then they give you a credit when that point comes, and credits are always a good thing.
Remember, you can to some extent control your electric, gas and heating oil use. Lower wattage bulbs when you don’t need quite so much light, turning lights out, adjusting your electric hot water heater can all be big money savers on your electric. As far as gas and heating oil, with heating oil, you can always turn the thermostat down, wear a sweater and use less oil. In regards to gas, a lot depends on how much you use gas for. It could be just for cooking, or just for heat, and you might have a washer and dryer that operate on gas, or it could be all of them. Ways to save a little on those costs include again, turning the thermostat down and wearing a sweater, but also with the washer and dryer, you can save a lot by only doing full loads of laundry as opposed to just a couple of items. Many utility companies also have programs where they will come to your home (free of charge) and inspect your home and give you some ideas of how you can reduce the costs of that particular utility.
When it comes to groceries, many of us overspend and end up throwing things out, which is a waste of food and money. But as humans, we are also creatures of habit, meaning that we might be so used to buying a particular brand, it never really occurs to us to try one that is less expensive or even the store brand. Most store brands are made by the major companies and relabeled for the store. So it is the same product at a much lower price. I will be the first to admit that there are some things that I want a particular brand, and it is worth the cost to me. I also admit to trying a store brand, and finding it so repulsive, I had to throw it out. But that store brand cost me a couple of dollars, and had I liked it, would have regularly saved me twice that. Sometimes, we just need to take the chance.
Finally, the experts you recommend you “pay yourself first,” meaning that you put something into your savings before anything else. I’m in no position to argue with the experts, but only you can decided which is best for you based on your income and lifestyle. Regardless, even if it seems like such a small amount, it couldn’t make a difference, it adds up. Think about it, if you can only afford to put ten dollars in savings a week, at the end of the year, that’s still $520. That might mean nothing if you’re a millionaire, but for most of us, that’s a nice little chunk of money.
For additional tips for reducing your interest and saving money in 2016, stay tuned to balance transfer promotions for offers, deals and advice on locking in savings with credit cards!