When attempting to balance our budgets and manage our money, we tend to look for the quick fixes, the things that we can do without having to inconvenience ourselves too much. This 1-2-3 approach is definitely not a quick fix but are fixes that when implemented will help you balance your budget and become better money managers.
1. Cut Expenses
Cutting your expenses is a critical first step to managing your money. When your budget is out of control, the fastest way to reign it back in is to cut expenses. For many this is a very difficult first set to make because it requires sacrifices and going without things that we have grown accustomed to.
Places to start cutting expenses:
I make more enemies than friends whenever I suggest this to others, but truthfully, for many this is a huge expense they simply cannot afford. If you are paying upwards of a $100 or more every month for cable or satellite and only watch a third of the channels available to you, it is time to figure out how you can lower this bill. Call your provider and switch to a smaller package, suspend your account for a few months, or simply cut cable out altogether.
We have not had cable in over eight years and we do not miss it. We still watch sports at our neighbor’s house, still watch great shows thanks to Netflix and Amazon Prime, and we still know what is going on in the world thanks to Facebook. Your world will not end if you cut the cable.
You have heard it before and it bears repeating; call your utility and insurance providers at least once a year to negotiate lower rates. Many have asked me after seeing our one income budget how we keep our gas (winter heating) costs so low and one way is that we have a fixed therm rate that we re-negotiate every year. You can save a potential $500 a year without changing your lifestyle by simply calling your providers and renegotiating your rates or by switching providers entirely.
Many people spend more money in this category than is necessary and some people make the frugal vs cheap mistake of purchasing too cheap clothing that will not last the entire year. I am a firm believer in consignment shops and thrift stores for clothing. In fact, I have not paid for any of the new clothes we have bought by selling our old clothes to consignment shops and then using that money to purchase new clothes. If you are trying to control your spending habits, make sure you are aware of how much you already spend in this category and determine if you are spending more than you should. Find alternative ways to score your family’s clothing for free or nearly free and make sure you are not just purchasing things that are on sale without having a real need for the item.
This is typically the largest variable expense a family has, the grocery budget. The first step to controlling this expense is to determine if you are overspending in this category. Are you throwing out food every week? Do you have dozens of canned goods in your pantry? What are the meals that you make most often? Are you simply purchasing something because it was on sale or you had a coupon? These questions will help you determine if you need to scale back how much you buy every week. If you have several items in your pantry and freezer, consider skipping a week and use what you have on hand. Consider using methods like speed shopping and a make or break price book to keep your grocery budget low.
2.Earn More Money
Once you have cut your expenses, if your budget is still not balancing, the next thing you should do is earn more money. This does not have to be in the form of a second job (if your budget is really out of control, a second job is the best option until you regain control) but can be in the form of making money online or working a side hustle like a blog or freelance career. You do not have to work to earn extra money for forever, set a goal to meet (like a debt to pay off or a certain amount to be added to savings) before you can stop your extra hustle to keep your eye on the prize.
3. Monthly Audit
You should review your budget and spending every month. Audit your budget and see if there were any mistakes, why you were over/under budget, and how you can better prepare next month. It is essential that you go over your audit with your significant other. If you share money, you need to be on the same playing field when it comes to the budget. If your significant other works 80+ hours a week like my hubs, email communication can be a wonderful way to communicate your budget with each other. Find a way that works best for you and stick to it.
Building a budget that works, takes work and managing your money takes even more work. I know that I have failed more times than I can count at managing my money, but it is not how many times I have failed that matter but rather how many times I have gotten back up and tried again that count. Without work and effort, your budgets and money will never work for you.
What are ways that you keep your budget balanced?
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