Living within your budget

by Chemain Evans

Having a budget and living within it are two different things. There are always things that we want (or need) and credit is so easy to get. This article will discuss ways to help you establish good budgeting habits.

First, determine why you want to budget. You need a pretty good reason or you won't feel obligated to do what it takes. Do you want to get out of and/or stay out of credit card debt? Or save for a new car or big vacation? Whatever it is, you need a reason so that you won't be enticed to overspend. Write down your reason or goal where you see it every day.

Second, examine your spending. Are you tracking your expenses often enough? If you aren't looking at your expenses every few days, you probably have no idea how much money you have and where it is going. Spend a few minutes each day or at the end of the week updating your records instead of saving it all for the end of the month (or tax season).

Third, recognize why and where you are overspending. Look at your expenses and see where you've crossed the line. Did you have a large, unexpected medical, house, or automotive expense? Does this happen frequently? Establishing some short-term savings can help cover these expenses when they occur.

Begin thinking of things in terms of what it costs you over a long period of time, such as a year. For example, if you pay $3/week to withdraw money from your ATM, that's over $150/year. Instead limit withdrawals to twice a month (or less) and that's over $75/year in your pocket!

Below are some other ways to reduce both mandatory and discretionary expenses:

• Increase your car insurance deductible to $500.
• Check around for better car insurance rates.
• Conserve utilities when possible.
• Consolidate your credit card and other consumer debt into a home equity loan and then cancel the cards, cut them up, and don't apply for new ones.
• If you are renting, try to buy a house; tax advantages for paying home loan interest often make it cheaper to own than to rent.
• Eat out less; brown-bag your lunch; find less expensive places to eat.
• Find cheaper entertainment (rent a movie instead of going out to one).
• Consolidate errands to use less gas.
  Limit grocery shopping to one day a week; shop at more than one store for groceries, if time permits.
• Shop around for a better long-distance calling plan or cell phone plan.
• Borrow books from the library instead of buying them.

Some find it necessary to go to a cash-based system. This is sometimes called the "envelope method." It involves cashing your paycheck and depositing only what is needed to write checks for bills or to cover bills that are automatically withdrawn from your checking account.

The remaining cash is divided into envelopes marked for expenses such as food, gas, etc. Once the money in an envelope is gone, to make any additional purchases you either have to shift money from another envelope or wait until you get paid. This really helps to develop discipline.

You may eventually find that there are no more places to cut and you need to increase your income. This doesn't necessarily mean getting a second job, although that is a possibility. Below are some other ways to increase your spendable money:

First, take a look at your tax return. If you're getting anything but a small return, you're letting the government earn interest for itself with your money. You probably wouldn't let anyone else do that! Consider raising your exemptions. You can acquire a new W-4 form to fill out from your Human Resource department or manager.

Second, save or invest wisely to obtain dividends. This is money that you don't have to work for! It's money working for you.

Third, acquire new skills that can help you get a promotion, or even a new job. Get your GED or college diploma, if you don't have one. There is a lot of financial aid available, and you may even be able to attend college for free.

Fourth, consider starting a home-based business. There are a host of tax deductions for home businesses, not to mention the extra income that may come from just a few hours a week. Although a home-based business is not for everyone, you may enjoy it enough to turn it into your next career!

Living within your budget is possible, but you must have a good reason to motivate yourself. Track your expenses often. Cut expenses and/or increase your income if you need to. Decide to make changes and do them today.

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