Choosing Me: Budget / Money Management

4/25/2013

Budget / Money Management

Most of us are having to work harder and longer for our money today. Our earnings are a precious commodity, so we owe it to ourselves to look after our money and spend it wisely.

Unfortunately, money management is rarely taught seriously in school, if taught at all, so 'trial and error' has become our teacher. This can result in enormous stress as we wrestle with paying bills, managing debts and saving for the future, against the ongoing challenges of inflation and for some, unemployment. Setting up a budget is the only solution, but take heart - many families find budgeting is much easier than they expect. What better time to find out than right now?

Tips and Tools You Can Use

Successful budgeting begins with clear identification of income and expenses, with the latter broken into fixed expenses (fixed payments that you have to make, such as rent, mortgage, loan payments etc) and variable expenses (ongoing payments that vary and could be controlled, including gifts, entertainment, travel etc.) Many tools are available to help you with this vital first step. Once completed, you'll be in an excellent position to begin taking control of your finances. Here are some great tips:

Assessing the situation

Add up your income from all sources, including take home pay, pensions, child support, alimony, rental income etc..
Determine the fixed expenses you have to pay, including rent, mortgage, utilities, loan payments, insurance etc..
Determine the variable expenses that you have some control over, including food, clothing, entertainment, travel, gifts etc..
Track your daily pocket-change expenses for a week or more, including snacks, newspapers and spontaneous small purchases. These can add up!
Add an amount for emergencies that may crop up over the year.
Add an amount for savings for the future.

Balancing income and expenses

Compare your income with the total expenses you listed above. If your income is greater than your expenses, reflect whether you could make better use of the surplus through saving or investments.
If your expenses are greater than your income, it's time to trim your budget.
Clearly identify the amount you need to trim from expenses.
If debt load is overwhelming, consider credit counselling.

Trimming expenses

Review fixed expenses. This is the hardest area to trim but savings are sometimes possible through better mortgage rates, loan consolidation etc.. In extreme cases, alternative housing options may need to be explored.
Divide your variable expenses into 'needs' which would include basic food, clothing and utilities etc. and 'wants', which might include entertainment, hobbies and travel etc.
Consider where savings could be made. There are many resources to help you with this.
Set realistic targets that allow for small treats. If your budget is too harsh, you are more likely to give up.
Be a financially wise food shopper

o Slash your grocery bill (http://www.chatelaine.com/article.jsp?page=money&cid=294933

o Save on purchases (http://www.ourfamilyplace.com/purchases.html)

o Find saving coupons on the internet (http://www.save.ca/)

· How to handle your debt load

o Manage Debt Step by Step(http://moneycentral.msn.com/articles/smartbuy/debt/contents.asp)

o 10 strategies to reduce your debt (http://moneycentral.msn.com/articles/smartbuy/debt/1330.asp)

o What Debt To Pay Off First (http://www.bankrate.com/dotp/news/cc/19980713.asp)

o Dealing with debt: from the Office of The Superintendent of Bankruptcy Canada (http://strategis.ic.gc.ca/SSG/br01035e.html#Possiblesolutions)

Savings and Emergencies

If at all possible, consider funds for savings and emergencies as budget 'needs'.
Try to cut 'wants' before you cut into these funds.
Consider automatic payroll deductions from your monthly salary into a savings account.