You know you’ve got to get a grip on your finances and save money. Saving money is never easy, especially when you are living paycheck to paycheck. Maybe you are like many families and spent just a bit too much during Christmas? The holidays are over and it’s time to sit down and look at your budget.
Maybe you’ve never set up a budget, or you have set a budget before but haven’t stuck to it at all. What’s the point in doing all of that work yet again?
They key is to make a budget that is realistic. In just a few easy steps you can be back on track and dig yourself out of debt.
Step 1: Honestly look at what you spend
Most banking websites have a feature that will break down your spending by category. My family used Quicken for years. Once our bank began the same service we ditched it and saved ourselves a few steps. Look at what you’ve spent (and where) in 30 day increments. This helps because we spend more on groceries in November and December than we normally do because of the holidays and entertaining family. Make sure you are checking the purchases in the “Miscellaneous” heading as well. You should be able to move those purchases into the appropriate group (dining out for example).
Step 2: Compare what you earn to what you are spending every month
Are you spending more than you earn? If this is the case you know that you’ll have to trim back quite a bit. It’s okay to make some sacrifices for a while, because you’re going to be set up later. Small changes like making coffee at home and bringing a lunch to work really help save money. You can also look at the potential to earn a little bit of extra money to cover some expenses. I’ll cover that in another article soon and link it back here for you.
Step 3: Set realistic budget goals based on your REAL spending habits
If your family normally spends $1000 on dining out every month it’s not realistic for you to set a goal of $200. Pair it down to what you feel is an attainable goal. Do this for EVERY category in your spending, even those categories which are non-discretionary. Those non-discretionary bills are still able to be lowered, trust me. Make sure lights are off, save electricity. Carpool with someone to work so that gas won’t cost as much. Be creative.
Step 4: Analyze your budget EVERY week And Save Money
It may seem like overkill but takes just a few minutes once everything is set up. If it’s not done weekly you’ll end up spending more time than necessary. You’ll have to wonder “Hmm, what on earth did I buy at Wal-Mart for $65?“. Looking at it weekly also helps you stay on track as you can see how close you are getting to your budget. If you overspend one week, scale back the following week. Doing this consistently helps you see where you are doing well and motivates you to save money.
Having (and sticking to) a budget really is the easiest and most effective way to not only pay off your debt but being able to save money. Mississippi Man and I have a single income in which we manage our mortgage payment and a total of 4 people, 2 dogs, 2 guinea pigs and a rat to feed. It’s not easy at first, but it’s completely possible.