Money Management | Budgeting

Money Management: Budgeting

Budgeting is not just about saving money. It's about taking control of your spending and determining exactly where your money is going. Research shows that nearly 60% of all U.S. households still don’t have a budget, and 11 million adults don’t monitor their overall spending and don’t know how much they spend on food, housing, and entertainment. Nearly 77 million people gave themselves a grade of C, D, or F on their knowledge of personal finance. With those alarming statistics, it is more important than ever to start using a budget.

A budget is a financial plan that compiles and compares a person’s income against all of his/her expenses in order to analyze spending and meet personal goals. Because most people pay their expenses on a monthly basis, it is recommended that you create a budget based on your monthly income. If you prefer to make a yearly budget, this is okay too.

Creating a Budget

Step 1  Income:

The first thing you need to do is figure out how much income you have. Most people’s income primarily comes from their employer and you have less control over this part of your budget. Others sources of income could include gifts, tax refunds, and proceeds from a sale. Don’t forget to add everything you expect to receive in a given month.

Step 2 – Expenses:

This is the part of your budget you have more control over because you are the decision maker. When evaluating your expenses, determine needs vs. wants. While there is nothing wrong with buying the things that you want, higher priority must be given to the things you need. Types of expenses include:

  • Fixed expenses - These are the types of monthly expenses that are always the same amount. While these types of expenses make calculating our budget easier because we know what to expect, they can also make it difficult because we have less control over them. Some examples of fixed expenses are car payments and mortgage loans.
  • Varied expenses - Unlike fixed expenses, varied expenses can change from month to month. These are the type of expenses we have more control over. We can increase or decrease the amounts depending on our budgeting needs. Some examples of varied expenses are food/groceries, utilities, and gas.
  • Periodic expenses - Although you don’t have these types of expenses on a monthly basis, it is important to still figure these in your budget as a monthly expense to ensure you have the money when the bill is due. Some examples of periodic expenses are car insurance and personal property taxes.
  • Unexpected expenses - Unexpected expenses sometime occur. This is why it is very important to have a savings account for those unexpected expenses. Most financial advisors recommend that you save 10% of your monthly income. If you can’t afford 10%, you can start off with a lesser amount and work your way up to this percentage. The amount isn’t necessarily as important as getting yourself into a habit of saving a portion of your income for emergencies or unexpected expenses. Some examples of unexpected expenses include medical bills, car repairs, and home repairs.

Step 3 – Do the Math:

Once you have determined your income and expenses, subtract your expenses from your income. You should have money left over. If you don’t you will need to take a closer look at your varied expenses to see where you can cut some costs. Here are some suggestions of how you can do this.

Ways to Help your Budget

Making simple changes in your life can often cut your spending by significant amounts in several key categories:


  • Save eating out for special occasions and make your own meals at home.
  • Plan your grocery store purchases by using a list.
  • Clip coupons.
  • Join grocery store membership clubs that qualify you for automatic discounts.
  • Carry your lunch to work, rather than eating out each day.
  • When eating out, skip the soda and opt for the free glass of water to save as much as one fourth on your total bill.


  • Look for sales rather than paying full price.
  • Shop at consignment and thrift shops.
  • Sell clothing you no longer want or wear at the consignment stores or rummage sales to recapture some of its cost.


  • Share rides within your family or with co-workers to reduce gasoline costs.
  • Combine your trips when you run errands.
  • Use public transportation if it’s available in your community.
  • Perform timely car maintenance to reduce repair costs.
  • Ride your bike when weather allows


  • Review services from the telephone, cable, internet, and wireless companies. You may be paying for services you don’t need.
  • Look for telephone, cable, cell, internet bundles that offer considerable savings for using multiple services from a single vendor.
  • Look for the “Energy Star” symbol when buying appliances or light bulbs to spend less on electricity and qualify for rebates from many power companies. Figure the payback period of appliance purchases to determine whether you are truly achieving savings.
  • Turn off anything that isn’t in use ranging from the air conditioner to overhead lights.
  • Run the washing machine or dishwasher with full loads whenever possible.
  • Use programmable thermostat to automatically adjust the temperature when you are not at home and when you are asleep. Try setting it a few degrees colder when the furnace is running and a few degrees warmer when the air conditioner is on.


  • Borrow books, CDs, and DVDs from the library instead of buying them.
  • Visit rummage sales to find low cost reading materials, movies, and recreational items ranging from baseball gloves to knitting needles.
  • Read magazines and newspapers at the library and cancel your subscriptions. Another option is sharing books, magazines, and newspapers with co-workers or family to reduce costs.
  • Pare down or cancel your internet, smart phone, cable, or satellite bill.
  • Meet friends for weekly walks or low cost craft sessions instead of shopping or lunch.
  • Substitute local vacations for faraway travels. Explore regional tourist sites, take advantage of amusement parks nearby, or visit family.


  • Consider the size and type of home that best meets your needs, which can include an apartment, condo, duplex, or single-family home. Many families have a bigger house than they need.
  • Buy or rent the home you need, rather than the biggest house or your “dream house”.
  • Consider sharing your home to reduce expenses. If an older member of your family is looking for company or your home is too large for your needs, you may be the perfect match. In a University town, you may be able to rent a room for short term to international students.
  • Learn to make basic repairs and renovations yourself. Almost anyone can paint or wallpaper a room.


  • Pay bills online to save on postage. Many credit unions offer free online bill payment.

Increasing Income

Increasing income is another way to reduce financial problems, although it can depend on economic conditions, job skills, family conditions, and other factors. Many people probably have a surprising number of options for increasing income.

  • Work overtime – At some companies, workers can request overtime work or volunteer for extra assignments
  • Take a second job – This can be difficult to balance in the households with children but there are always options. Some adults opt for second jobs at department stores that offer employee discounts on clothing or other purchases to help stretch their budgets.
  • Sell something – If you can no longer afford to own a boat, selling it can reduce your debt and bring flexibility to your budget. If you have a hobby that creates attractive items that others would be willing to pay for, consider selling them at a craft fair or a rummage sale. Clean out your house and sell unwanted items at a yard sale for vacation money.
  • Think creatively – One family earned extra income by providing dog-sitting services for owners who were on vacation. Another worked together to take on a paper route to boost their weekly spending allowance.
  • Set long-term goals – While it may not be possible to boost your income now, creating and following a spending plan can make it possible to change your circumstances to fund the pursuit of long-term goals, such as additional job training, higher education, or even relocating to another part of the country.
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