There are many major events in life that define and shape who you are as an adult, many of which you don’t see coming until it’s right on top of you. Many people that leave the security of their parents house for the real world discover a world of freedom and endless possibilities. Many of these people also develop the spending habits of Lindsay Lohan without really knowing where the money’s going before it’s too late.
I used to be that way, I left High School and the security of my family guiding me financially to a world of credit cards and fast emptying savings accounts. The money was leaving fast and not coming in fast enough. As a result I needed to get a job to support my spending and I realized that the money was going out faster than it was coming, but yet again, I couldn’t really pinpoint where. Fast forward five years to a spreadsheet filled with nonsensical numbers and columns upon columns. Yes, the budget, something I discovered way too late after all the damage had been done.
A budget is simply amazing for many reasons, but the most important one is that it allows you to discover what you’re spending simply too much money on and therefore can realistically cut back on to make ends meet. Many people that begin budgeting realize two different things. First, you might realize that buying an iced coffee every day was a really bad way to spend your money last year, and the more sobering problem is that you spend more than you make. In fact, according to Way2Hope.org http://www.way2hope.org/tips_on_budgeting.htm this problem is extremely common and in fact, they’ve coined a term for it, they call it outgo. Yours truly has experienced outgo as well, but it’s very easy to solve these problems of outgo by prioritizing where money goes first and remove what isn’t necessary. Money for food, shelter (rent, mortgage, utilities, taxes, h.o.a. fees etc.), and transportation (especially if it’s necessary for work) are the most important expenditures and should be paid first and foremost. Next are any line of revolving consumer credit (as it effects your credit score) and finally the lowest priority are those iced coffees or snacks that you get at the vending machine.
You may see that as you’ve listed your expenses and have accounted for the most important items that you might see that you’re still experiencing outgo and may have to cut even more out (something you may not want at all). I call this separating the needs from the wants. Of course, we’d all love to go out and get a beer or two followed by a nice meal and generous tip for your server (tip your server people!) but is it really necessary? Your cable package includes all the premium movie channels and costs almost as much as your car, is it really necessary to have all those channels and not have the time to watch them anyway? After you’ve prioritized, removed the needs from the wants and finally compared the numbers you may still see that you’re experiencing outgo. If you’re experiencing this, there are many ways to fix this and not go under water. Completely remove cable TV, cut out your data package and/or text package from your cell phone provider, car pool to work, buy generic brands instead of brand names at the grocery store. You can also follow my personal tips to help cut even more out of your budget.
- Cut coupons like a mad man (or woman) – you’ll see that it’s possible to save a decent amount of money per trip and still get the items you normally buy
- Use direct deposit or deposit cash at an ATM – with direct deposit you get your paycheck virtually as soon as it’s available and many ATMs nowadays allow you to deposit your money faster than you would than with a teller
- Adjust your thermostat accordingly – You may find it very comfortable at 76 compared to the antarctic temperatures you used to keep your home at
- Remove that gym membership that your insist you’ll need – and use but you never seem to go
- Read this blog daily
You may find that you’re in a hole deeper than you need to be and that you still don’t want to make these sacrifices (especially if you’re accustomed to your lavish lifestyle) but you need to remember that these changes are necessary for your financial health, state of mind and overall comfort, and most importantly, your future.
For even more tips on budgeting, browse the web or visit http://www.moneymanagementtips.com/budgeting.htm