One of my goals in helping my clients is good budgeting. Helping others plan how to live within their income and plan how spend their money wisely is a way to have less stress.
My parents were wise money managers. They became wise early in their marriage by reviewing their expenses. Dad saw the misc (miscellaneous) category was way too big. So he set up a regular generous household allowance for mom, who was a stay-at-home. He also created better tracking for incidental/discretionary expenses. He saw that credit fees could be never-ending. He renamed one “revolving” charge card to “revolting.” And got rid of it. My parents good habits enabled them to help their kids and grandkids. They had money to spare when they left this world. Being blessed with an inheritance from them enabled me to start my own business.
I wish I had followed their example earlier in my life. But like a lot of younger adults, I wanted it all now. Patience is still a virtue and being able to pay in cash for things can save a lot of money in the future.
Over 10 years ago my husband and I made a faith-based decision to get out of debt. Especially credit card debt. It took a long time, but we did it. We saved money for emergencies, so we would not fall back into the card trap. Once out of debt we were able to pay cash for a car and continue to save. We even took a really great vacation.
Now I want to help others with what I learned through this experience.
- It takes time-set aside a monthly/quarterly/annual review of your income & expense
- It takes planning-work on a spreadsheet that makes sense to you
- It takes support-your significant other or bookkeeper can help
- It takes commitment and perseverance-don’t be surprised by the unexpected**
- If you begin with prayer, the rest will come easier.
At year-end is a good time to review how money has been spent throughout the year and to plan for the next year.
INCOME: If find it easiest to look at net or bring home income when planning my budget.
FIXED EXPENSES: Things like rent/mortgage, utilities, taxes are fixed expenses, but they may go up or down. Look at a better phone plan or more efficient heating. Do you really need to pay for 100 TV stations? Find new tax deductions with help from your CPA. Just recently I asked my insurance agent to review my policies. I will be saving some money on my home insurance. Raising deductibles is a way to save on insurance.
DISCRETIONARY EXPENSES: Non-essential spending also called discretionary should be reviewed. How much money is spent on entertainment and dining out? I spent $5.00 one morning at a coffeehouse by the time I paid for the tea and tip. No food, just a tea bag. Oh my! Water is still free most places.
There should a budget line item for vacation and dining, but it should be reasonable. Holiday gift giving should be planned as well. Getting big credit card bills after a trip or holiday is not necessary. You can avoid buyers remorse when you open the after holiday mail. If I use a credit card at all, (which is rare) then I post the amount in my check register so I remember to pay it off before it accrues any interest.
EMERGENCY EXPENSES: What is an emergency? ** Is the house on fire? Is there a natural disaster? Do you need an ambulance? Those are my definitions of a real emergency.
Many other money matters are a matter of better planning. Car and home maintenance can be planned for in the budget, so you won’t need the credit card when the unexpected happens and the car or HVAC needs fixing.
GIVING: Some religious and charitable groups emphasize donating a percentage of income to charity. I do agree, those who are blessed should bless others. I also believe those organizations should teach better money management before guilting their followers to giving what they cannot afford. If you feel giving is very important, then consider working to eliminate card and bank fees to free up more money that can help others less fortunate. And consider the charity. The ones who advertise the most may already have a lot of money. What percentage of your money goes to fund raising vs actually helping?
SAVING: Last but certainly not least. I automatically move money each month to a savings account. When I get more income or reduce a bill, it is an opportunity to increase savings. The money I no longer spend on overdrafts, late fees and credit card interest make savings and cash flow much better.
Ready for change? Want less stress? Don’t know how to start or feeling overwhelmed? Ring my bell!