So I’m hoping I didn’t lose everyone as soon as they read the title word, “Budget.” Anyone still there?
Just thinking about creating a budget makes some people break into a panic. I often hear people say, “I just don’t know where all my money goes!” and I usually reply back, “Well, find out!” Often on paper it appears that all our bills should be paid and we should have extra savings for emergencies and cheesecake and all those good little luxuries in life. But then at the end of the month, the money is gone, the bills still aren’t paid and savings are….what are savings again? And we say, “But I didn’t buy anything I didn’t need this month.” Yet when we dig deep we realize that we $5-ed ourselves into our money disappearing. “Oh it’s only $5.” Say that 20 times a month and you’ll find yourself $100 poorer. Multiple that by a family of 4 and you are out $400 quicker than you can blink.
Well it’s time for us to pull our heads out of the sand, brush ourselves off and take a real hard, and possibly painful, look at where our money goes each month.
For those of you that use credit cards, pull out your monthly statements. For those of you that don’t, gather up all your receipts, bank statements and bills and start from there. Going forward, all of you will be keeping your receipts for at least one month. I know, it may be hard. There are times where my receipt seems to vanish into thin air before I even make it to the store exit door. But we are going to take the time to give them a safe new home until we can look into the details on them.
I started to carry an empty checkbook cover and stuffed my receipts in there. Whatever you do, you need to find a method that works for you and stick to it for keeping your receipts. Because financial knowledge is in the details. “I spent $100 at Target” tells you nothing. But perusing through a receipt to see that $20 was from that beckoning dollar spot that gets you or maybe $30 on a toy your kid didn’t need….that’s useful info. That will help you alter your shopping habits so that at the end of the month, you can afford that cheesecake you’ve been craving. (And if you haven’t been craving any, you may by the time this post is over…)
So now you have a pile of receipts. Where do you begin? Well hopefully somewhere in your house is a set of highlighters. And if not, bum some from a friend until you can get a hot deal on a set. You’ll need pink, yellow and green. And here’s the gameplan, we’ll go positive to negative:
Green = These are things you TRULY needed. They were on your shopping list. (No shopping list? We’ll get to that another day!)
Yellow = These are things that you needed but weren’t on your list. Maybe you forgot you did need tomatoes for tonight’s dinner. Or maybe the clearance rack had a tube of toothpaste you could get for almost free after coupon and you are low. Eventually you’ll analyze if these yellows could have been better planned for.
Pink = Think of pink as red. The red highlighters are too dark and make your receipt illegible. So pink it is. Now these are things that you should have stopped yourself from buying. That pair of shoes that while they looked pretty, you had 2 pairs almost like them at home. Not a need at all!
Now that you have those receipts highlighted and looking all festive, look at what you bought. Where do your green highlights lie? Over time, these are the things you’ll budget for. More than likely, they’ll break out into categories such as groceries, household expenses, personal care, clothing, pet supplies, gifts, etc. Your long-term goal is to have a receipt of almost all greens. Yeah, I’m still gonna give you some wiggle room for a few yellows because, life happens.
Your budget should include all your life necessities such as Housing, Utilities, Car Payment, Loans, Credit Card Bills and all those things listed above. You’ll have some flexible things such as Entertainment, Travel, “Allowance”, etc.
Your goal is to set a reasonable budget and do what you can to stick to it each month. And if the money runs out for that category, you need to figure out how you could have made cutbacks so the money could have stretched the entire month. I’m going to share ways throughout this series of how to make the most of your money but for now, you need to figure out where you think your money should be going. That is the top priority.
Your budget is your path each month. It’s going to help you achieve that long-term goal that you set.
1) Pull out credit card and bank statements and receipts. Take a hard look at where you money is going. (I know, it’s painful!) And break them out into categories.
2) Take 1 month and keep all your receipts.
3) Take the time each day to highlight those receipts so you have a better idea of what type of shopping you are doing.
4) Brainstorm ways to find cut-backs on those areas where you spend too much.
What’s awesome is that we live in an era where we have access to the Internet which holds a plethora of information on how to create a budget. Seek out the way that works best for you.
How Can a Budget Save You Money?
1) You’ll have a better idea of where you money is going and find ways to make the cutbacks needed to make your money stretch farther.
2) When you get closer to the limit on a category that month, it will make you slow up your spending and think twice about what you are buying.
3) By analyzing receipts, you’ll see what kind of shopper you are and possibly learn to plan better or to do without things that are just “wants” and not “needs.”
4) You might see that you are spending money on something you can truly do without.
Stay tuned for the next post in this series!