02 February 2009

Putting Your Budget on a Diet

Yeah, you heard me correctly. It's time to put the old budget on a much needed diet. I figure since I have bored you all to tears with my weight loss journey, I might as well capitalize on this theme and take it to another level. Due to our current situation, I am in the process of creating a new budget; one that we can actually work with. So, I'll take you all along for the ride.

First thing to do is to gather all your bills and place them on the table in front of you. You will need to include every bill you pay on a regular basis: Mortgage, insurance, credit cards, sewer, water, garbage, Association fees, phone, cable, gas, electric, fuel, food, and any other ones you may have. These constitute your fixed expenses. If some of them are billed on a quarterly basis, then you will need to divide that amount by 3. If billed on an annual basis, then divide by 12. You will most likely have some bills that fluctuate from month to month, so in order to get a rough estimate, try and get your bills from the previous year and average them out. Once you get a monthly total, you will have a pretty good idea of where you stand.

The next part of this budget is going to seem rather odd, but it will really be an eye-opener. As you go through your day, whenever you buy something write down a description and the amount you paid. Keep a diary of these purchases for at least one week. At the end of the week, add-up everything you purchased and take a look at the total. Most likely, you will be surprised at where your money goes. The $5.00 cup of coffee or the $1.50 spent on a snack may not seem like a great deal at the time, but it adds up over the days.

Now that you have a better picture of where your money is going, you will be in a much better situation to begin re-allocating your money to where it is most needed, for example paying off those credit card bills. If, by chance, you find that you are over-budget, you will need to take a hard look at your current expenses and decide where you can cut some fat. Look around and try and find things that you Really don't need. For example, do you currently have cable and subscribe to every service they offer? Try and look into cutting back to a more basic service. Ask yourself, do you really need all those movie channels? How often do you watch those movies and how often do they actually play movies you care to see? What about canceling that expensive service and putting your money elsewhere. If you really need your movie fix, what about joining Netflix or Blockbuster. That way you pay for only the movies you want to see.

In our case, it's water delivery. We get bottled water delivered twice a month and shell-out around $48.00 for the privilege. Now, the water itself is not that expensive, it is the rental cost of the dispenser which drives the price up. So, we are currently looking into discontinuing that service. Thus, we can steer that money towards one of our bills.

To sum up, my point here is to try and give you tips on how to visualize your current financial situation. If you can actually see where your money is going, you will be in a better situation to be able to control your finances, instead of them controlling you.

17 comments:

  1. Very good tips! I use Quicken to track our income & expenses and I get a thrill seeing assets go up and liabilities going down so this is right down my alley. Yeah, I know, I'm odd!

    By the way, I agree that the Super Bowl was really good! I'm glad it was close and it was certainly exciting!

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  2. BeadedTail: Thank you. No, that is not odd, I like to do the same thing, except as of now the results are not too promising, but that will change:)

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  3. Hi Tim,

    Thanks to remind me that my total income its far less the amount of my bills,lol.
    I think that could be very scary to do, I mean putting bills all together to see the real truth and nothing but the truth about where we really are in terms of debt, but I know it is a bitter medicine we need to swallow, so be it.

    Thanks
    Hope not to have a Hearth Attack, lol.

    Luis

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  4. Marketing Business Review: I know what you mean! It is a very eye-opening experience, but it is something that needs to be done. How to prevent the heart attack...rum and coke will help:)

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  5. Great tips! We are currently working on reworking our budget too. It is eye-opening when you put everything out on the table and really look at it. You really get a picture of where your money goes.

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  6. I keep track of all our income and expenses on a spreadsheet and record everything! Also our 401k contributions and our bank savings. Last year we came in under budget!

    My parents had us keep track of how we spent our allowance when we were kids so that was very good training.

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  7. Thank you for the helpful post. Budgeting is such an ugly task when facing huge income losses BUT not budgeting is even worse! Looking at things annually really does open your eyes. Let's all do what is necessary and survive this storm. Stay hopefully all!

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  8. Oh, boy.... this is gonna hurt! LOL!
    If my finances were as in shape as the rest of me, I'd have no problems!
    Budgeting is hard for me to do simply because I'm stubborn. I insist upon going just a bit above my budget on certain days, say, if a friend has a birthday or there's some celebration or event I'd like to attend. I used to have an "entertainment" section to my budget, but staying within the boundaries of it is hard! I guess I really need to get a lot firmer and harder on myself with it though, because what happens in the end is that I end up borrowing from Peter (some other bill's money) to pay Paul (a more pressing, immediate bill). Yeah.... budgets. Love 'em, hate 'em, but just like spinach, they're the best thing for you! :D

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  9. Dori:Thank you. I know, it is something I have been putting off for a while, but I really needed to find out where we stood.

    Karen, author of "My Funny Dad, Harry": Congratulations! That is terrific news. I think I need to learn how to work Excel, so I can do that.

    redkathy: It is not one of my favorite things to do, but if I didn't do it, we would be in a much bigger mess.

    Smith: You're welcome:)

    The Fitness Diva: That was well said! I hate them as well, but during this time I really need to have one, otherwise I have no idea what might happen. You mentioned spinach, I immediately think of spinach dip. What is wrong with me:)

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  10. An excellent post and timely given the state of the economy. Being married to an accountant...well, can you say spread sheets! However, I do the visualization is a tool that could help many folks. There was a few years back a financial planner who showed college age kids how much money they'd have or potentially have if they made coffee and home instead of buying the $5.00 coffee shop specials. The figure was pretty asounding.

    One I might ad that I think would hit lots of folks is cell phones. Ever notice how frequently the young set get new phones with all the bells and whistles? I get a phone until it's too old to really be servicable. The young kids I work with change phones every couple of months, meanwhile complain about not having any money. I mean does a high school kid or college kid really need a blackberry? My answer...big fat NO.

    Sandy

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  11. Sandy: That kind of shows how behind the times I am, because I didn't even think of cell phones. You are correct, because there are plans for everything from texting to playing games on the phones. My wife has a cell and we have just the basic service on it. My kids will NOT be getting cell phones, I did very well growing up without them and I do not see the need for them to have to have one. Texting, how about talking to them in person or writing a note? I know, my age is showing:)

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  12. I had a friend whose budget plan was as follows:

    He put all of his bills into a big glass bowl. Every paycheck he took out a bill and paid it. When credit collectors called he explained his budget plan and finished up by saying, "If you keep calling me I'll take your bill out of my bowl."

    It seemed to work for him. ;-)

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  13. Jane Doe: I love it!! That's a great idea! Now, where did I put my bowl...

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  14. These are all simple and yet very practical and effective way to diet our budget and save more. Really great post.

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  15. Ana-Retirement Plans: Thank you very much:)

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  16. Very good post with lots of great idea. When I used to have water delivery, I bought my own dispenser, not a fancy one, just a plain old one and it saved me quite a bit of money. Just a thought for you if you want to keep your water delivery.
    I know I've pared down my budget to just the essentials.
    Thanks again.

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  17. Mountain Woman: Thank you. We were thinking of doing the same thing, but I can't find one for under $150.00. I'll try for another week or so, but after that I think we will have to call it quits with them.

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