What if I Don't Have Enough Money?

A question I frequently hear is, “what if I don’t make enough money to cover my expenses? How do I save, how do I avoid debt?”

Most people probably have more money than they actually realize. The first step would be to look at how much money you’re spending on non-essential items. When you start tracking your money and where and how you’re spending it, it can sometimes be surprising how much you actually spend that you weren’t even aware of.

The next thing to look at is what you have defined as essentials. Are some of the things that you spend money on really necessary? Right after I got out of college and wasn’t making much money, I decided that I wouldn’t have cable television. Although I definitely wanted it, I knew it wasn’t necessary and decided that it wouldn’t fit into my budget. What types of services or items are you purchasing that aren’t totally necessary?

It’s also good to look at how much you’re spending on your essential items on a regular basis. Make sure not to get complacent with your service charges, shop around and find the best deal. Can you save money by bundling your insurance, or switching to a new company? One note on this, make sure you don’t switch to save money if the new service doesn’t meet your needs; notice that I wrote find the best deal, not just the best price.

Practice delayed gratification. When you find something that you want, it can be really hard to wait to purchase it. But it’s much better in the long run to save up and wait until you can afford an item than to get into debt. See this clip from SNL called “Don’t Buy Stuff You Cannot Afford.” It sums this point up beautifully and comically.

If you are one of the few who truly cannot pay for your basic needs you’ll need to look into other options. Find out if you’re eligible for any aid programs, get a roommate to help with rent or the mortgage, try to find a job that pays more even if it isn’t your first choice of work. But most of us can use the tips in the previous paragraphs to find more money than we ever realized we had.

Can You Help the Economy to Recover?

This is a great post about the part that consumers, you and I, played in the current economic recession.

The encouraging thing is that maybe you and I can help to eventually turn the tide by being responsible with our money. Thus this blog.

Now May Be The Time To Invest

This article is a bit older, but it is a good post about why now may be the right time to invest.

How to Use a Budget - Post #3

Now that we've walked through the steps of creating a budget (see here and here); we'll talk about how to use your new tool.

The purpose of creating a budget is to understand how much money you have available to actually spend so that you only spend that amount. Now you know how much money you can spend on eating out or buying clothes this month without getting into trouble. Although the real trick can sometimes be actually sticking to your budget. Let me point out that a budget that you don't stick to is a waste of your time. So how do you make sure that you're spending what you decided you should?

Although this is a little old fashioned, if you're having difficulty sticking to your budget here's a really helpful trick: Keep your money in envelopes for each category and only spend what you have in the envelope. Once your envelope for clothes is empty, you don't buy any more clothes until you earn more money to put in that envelope.

I'm obviously someone who likes technology, and I grew up on a debit card. But I found that it was difficult to keep our spending under control when my husband and I were both on the debit card for all of our purchases. So we moved to a cash only basis for our "free" money. This has been very beneficial for 2 reasons: We only spend the money we have on hand so we're sticking to our budget; and we frequently spend less than our allowance so we're able to save up for bigger "fun" items. Saving our unspent allowance is how we got the TV we have now.

A budget can help you to stop spending too much money, and it can even help you to stop spending money altogether on some items. If you find that your Starbucks habit just doesn't allow you to balance your budget, you could cut it out completely and stop spending money there.

Used correctly, a budget can be the tool that helps you to get your spending under control and truly manage your money.

How to Create a Budget - Post #2

This is the second in a series about how to create a budget. These steps take you through the mechanics of actually creating and working with a budget. Read here for the first three steps.

Step 4: Create categories for all of your money. These categories will be driven primarily by how you spend your money, and so you'll need to modify it for yourself; but here's a list to get you started.

Savings (yes, it's first on the list because you should make it priority for those inevitable lean times)
House - mortgage/rent, insurance, repairs
Auto - payment, insurance, fuel, maintenance
Food - dining, groceries, lunch money
Entertainment
Credit Card
Cash allowance (I know, cash is a little old fashioned, but it's easier to stick with the right amount on your "free" spending than using a debit card)
Charity donations
Daycare
Medical
Life insurance
Telephone - land line and/or cellular, ISP
Utilities - water, gas/electricity, sewage
Garbage Removal
Gifts
Vacation
License Plates
Television
Bank Fees
Business Expenses
Clothing
School Supplies & Fees

Step 5: Based on your tracking of how much money you spend, assign a certain amount for each category per month (or whatever time frame you're using.)

Step 6: Balance your budget. This is a vital step, your income has to be at least as much as your expenses. If you find your expenses outstripping your income, you will need to make some tough decisions about where you can cut back. Can you spend a bit more on groceries which will save money on food since it costs less than eating out? Can you check around and see if you can get a better deal on your insurance? Do you qualify for any assistance programs for your utilities or daycare? However you get to the bottom line, your income has to cover your expenses.

The next post on budgeting will talk about how to use this new tool to actually make a difference. Because that's just what a budget is, a tool. And no matter how fancy or thoughtful your tool is, it only works if you use it correctly.