A year ago I told my husband I wanted to quit my job and stay home to raise my daughter. His response was, “lets do a budget”. And that’s what we did. Our budget helped us realize what our current financial situation looked like. It helped us make a educated decision. We knew this was a big decision and it would significantly impact our finances. Now, you don’t need to be in our situation to have a budget. You just have to care about your finances. You work so hard everyday to earn a paycheck. Why not know were it is going? Follow these five easy steps to save lots of $$$.
1. HOW MUCH DO YOU MAKE?– Wether you are a one or two income household, calculate how much your total income is, AFTER taxes. If your paycheck fluctuates a little, then use the least amount that you would ever get.
2. BACKTRACK– Gather all your receipts, bank statements, credit card statements, and bill invoices for the last three months. Make sure to keep each month separate. If you do not have all of your past records, just start gathering now and work on the budget three months from now.
*** For the time consuming part. But time is money and I promise you that the time you spend will save you money.
3. WHERE IS YOUR MONEY GOING– Make an Excel spreadsheet or use one that you find online. You can even be old fashion and just write on a piece of paper. Fill it with every expense you could ever imagine having. The more detailed you are the better it will help you. Then go through all three months and figure out how much you spent on each category. The easy ones will be your fixed expenses, but include all your changing expenses as well. You will probably be surprised with at least one category, if not all.
4. EVALUATE– How much did you spend on what? What were your spending choices and habits? Did you spend more than what you made? If the answer if yes, there is a big problem. You are living outside your means, and are probably increasing your overall debt every month. You need to figure out what you can live without, or cut down on. Figuring out what is a necessity, and what is a luxury. (Future blog: How to save on common household expense)
5. GOALS– Create a goal budget and discuss your plan of action with your entire family. You want your entire family on board. Make sure you are budgeting an “emergency savings” contribution each paycheck. I can’t stress how important it is for every family to have a savings account with money in it. By having a savings account, you are able to borrow from yourself whenever you need to. Plus, it will be interest free, and you will never be denied.
Let me know how it goes!