Simplify Your Budget. Don’t Sacrifice It!

Budgets can be Simple, you just need to make a plan and stick to it. Budgets are for everyone, not only for people with limited income.  Making a budget can be compared to making a new weight loss plan.  Don’t try to make too many drastic changes all at once; otherwise you will never stick to it.

Set a long term goal, but then break it down into smaller more attainable goals over shorter periods of time. This will help you keep track of your budget and spending, while at the same time motivating you to continue on the right track each time that you reach your financial goal.

Once you have made a monthly budget (which should be 80% of your total income after tax) make sure to include your housing costs, utility bills, debt repayment, transportation costs, food (both grocery shopping and eating out), retirement investing, as well as any educational costs. Yes, your investment contributions should be in your budget. Break your monthly budget down into a weekly budget, and then into a daily spending allowance.  When you leave your home in the morning take your daily spending limit with you in cash.  This avoids overspending on “must have, must see items” and “compulsive purchases”.  If you don’t have the money for it, then you can’t spend it!

You should never carry your credit cards in your wallet.  Leave them at home.  They are for large purchases only such as furniture, appliances, jewellery etc.  Credit is a good payment method for large purchases because most cards offer an extended warrantee as well as purchase points to earn rewards.  This is the only time that credit should be used.  Credit Cards are not a personal loan.  They are also convenient because the daily spending limit on a debit card is usually restricted, whereas you can purchase any amount (up to the limit) on your credit card. Before every purchase ask yourself “Do I really need it or do I just want it?”

Of course emergencies come up and it is also ok to use credit for unexpected medical expenses and car repairs since these are “must have” emergencies. The extra 20% that you are not factoring into your budget will accumulate into your emergency reserve fund. Once this reaches 2 months of your total after tax income put it into a liquid investment such as an enhanced cash account or a money market fund.  This allows you access to the money at anytime while still earning some interest if you don’t use it. Adjust your spending habits. If you spend a little more one day, then save a little more the next day.

People spend the most on food and consumer goods such as beauty products and clothing. Just because it’s on sale doesn’t mean you need it. Stay away from “low price” stores such as Wal-Mart. Your brain thinks that you can buy more because the prices are advertised to be lower. The next thing you know you are at the checkout and your bill is $500.

Here are 5 quick ways to cut your budget

1. Save on personal services such as spa manicures and barber shop shaves. Do it at home. It’s not as glamorous but neither is being broke.
2. If you want to eat out then eat out at Self Serve Places…not restaurants and buffets. This way you can control the portions and therefore the cost.
3. Stay in and rent a DVD. Don’t go out to the movies.
4. Wash your car at home…or park it outside in the rain J
5. Write a grocery budget before you go to the store. Obey your list. Remember that alcohol is not a necessity. Don’t shop for groceries while you are hungry this causes overspending because when you are hungry everything looks good.

The next time you think of spending beyond your budget and promise yourself that you will make it up remember that paying your bills on time is more important than buying material goods.