by Michelle Jones
In my last column we discussed the alarming news that the majority of Americans are living paycheck-to-paycheck and barely making ends meet. More jobs and higher pay would be nice, but what we really need is BetterBudgeting in every household.
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Make a Plan
Now, let’s take a look at how a budget should work and see if we can get out of this living paycheck-to-paycheck syndrome. As it is with achieving many goals in life, what you need is a plan!
Whether you write your budget out on a ledger or sheet of notebook paper, or use one of our recommended software programs, just make sure your outgo does not exceed your income. If it does, continue working each month to make the numbers match up better, making changes to your income or lifestyle as best you can.
Get debts paid off as quick as you can. One of the best ways to do this is to make a list of your debts and start paying off the smallest balance first, then the next smallest and so on. Each time you get a debt paid off take the money you would have paid on that and put it towards the next one you’re working on. And meanwhile, don't accrue more debt.
After making a list of all your spending for the last 30 days you should have a rough idea of how much you’re spending each month and what you’re spending it on. Make adjustments to your budget if needed or reduce your spending. If you’re still unsure where all your money is going or feel that it may fluctuate from month to month, keep a tracking list for 90 days and then figure the averages.
You never know, you may think you’ve cut every extra expense that can go, but there’s usually a few more expenses that can be cut. It may also help to think of these cut-backs as temporary, for they usually are.
Save as Much as You Can
When you create your budget, of course you’ll need to ration your monthly income to cover all of your expenses (housing, utilities, bills, doctor visits, gas, food, haircuts, clothing, etc.), but don’t forget to add a section for savings, based on your income. If you’re unable to save even $5-10 a month then make it a goal to start as soon as possible. Once you’re able to start building a savings account you can begin investing and earning interest on your money; instead of paying interest on your debts.
If earning more income is an option for you then go for it. Just remember to have a plan for where that extra money is going to go because if you don’t, it could be just another paycheck that disappears.
Stick to Your Budget
After you’ve made your budget and financial plan, make a commitment to stick to it as much as possible.
Life is always changing, and your budget will undoubtedly change along with it. I recommend reevaluating your budget either annually or quarterly.
It may sound crazy, especially if you have extremely limited funds, but as many of you already know, it is truly more blessed to give than it is to receive. And there are many ways to be generous besides writing a check, even just sharing a meal with a neighbor who’s under the weather can be more important than any amount of money they could possibly have. You may feel you can't afford to do anything, but life will surprise you.
So let's make our plans, stick to our budgets, and keep our eyes and ears open for how we can always be generous.
THAT'S Living a Better Life®!
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Copyright © 2003 by Michelle Jones. All rights reserved.