For some of us, budgeting is second nature. For others, it seems a nearly impossible task. There are just so many things to consider that it’s hard to decide where your funds should go.
Setting priorities makes budgeting much simpler. But even this is difficult for many household money managers. Priorities are somewhat subjective, and those within the household often have vastly different priorities. Here are some ways that you can make priority setting a little easier:
1. Keep first things first. When it comes down to it, there are only a few things that we truly need to survive. These things include food, water, clothing and shelter. Transportation and other things that enable us to work and continue to make money also fall into this category. These should always come first in the budget, although it’s always a good idea to do our best to save money on them.
2. Keep savings in mind. We all need to put money aside for emergencies and set up a retirement fund. It’s also wise to set up a college fund for each of your children as early as possible. But many families push savings to the side, and it often ends up out of the picture altogether. Putting money away prior to any discretionary spending is crucial if you wish to meet your goals.
3. Evaluate your debts. If you have none, you’re in the lucky minority. Most households have large amounts of debt, including mortgages, car payments, loans and credit cards. By paying your debts off as quickly as possible, you can save lots of money in the long run. And once they’re paid in full, you’ll have a lot more wiggle room in your monthly budget. Putting as much money as you can afford toward paying off debt will help you reach that point much faster.
4. Set goals as a family. Maybe you would all like to go on a nice vacation next summer. Get everyone involved in deciding where to go, then calculate your expenses. Get everyone involved in saving money for this goal. Not only will you get to go on a family trip, you’ll also be teaching your children about budgeting and teamwork.
5. Review your budget periodically. A family’s needs change over time, and if your budget is no longer meeting your needs, it’s time for a change. Once again, you’ll need input from everyone in the family to make this work.
Priorities are at the heart of a successful budget. By keeping them in mind, we can resist impulse spending and make progress toward our financial goals. And by getting input from the entire family, you can gain valuable insight into individual needs and encourage interest in working together to keep your finances in good shape.
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There’s much more to life than money. But a lack of money can really put a damper on everything else. Financial stress has a way of darkening one’s entire outlook. And the fact that it tends to be self-perpetuating makes it even worse.
When you’re facing financial stress, you may feel that the only cure is more money. While that would certainly help, it is not always forthcoming. So we must learn to set priorities in order to make sure our needs are met. But when you’re facing a sudden change in your finances, that’s not always easy.
Here are five tips to make setting priorities during hard times easier.
1. Remember the basic essentials of life: food, water and shelter. Take care of those needs first. Pay your rent or mortgage, electric bill (for safe food storage and cooking), and water bill first thing each month. Next, buy groceries. Then tend to everything else.
2. If you have a job, make sure you have a way to get to and from work every day. This means paying for public transportation or maintaining your own vehicle. If you must drive, auto maintenance should be a top priority. If you don’t properly maintain your car, you could find yourself with no way to get to work, putting you in danger of losing your job.
3. Do your best to stay in good health. Get plenty of sleep, eat fresh, healthy foods and find a way to pay for any maintenance medications you need. If you are uninsured, apply for Medicaid or seek out free or low-cost clinics in your area. Staying healthy in the first place will reduce your chances of incurring large medical bills, which could cause even greater financial stress.
4. Keep major appliances such as refrigerators, stoves, air conditioners and furnaces in good repair. Heating and air conditioning units should be checked for problems each year to help prevent breakdowns, and filters should be changed as recommended by the manufacturer. If your stove or refrigerator is on the fritz, having it repaired instead of buying a new one can save you money. If something must be replaced, try to find a used one first.
5. Reduce or eliminate expenses for things you can do without. If you have a cell phone, you may be able to get by with a cheaper plan. If you also have a home phone, consider having it cut off and using only your cell phone. Cable or satellite TV is not a necessity, so if you’re having a hard time making ends meet, consider getting it cut off.
Financial stress can affect our decision-making skills when we need them the most. By setting priorities, you can manage your money more efficiently and eliminate unnecessary spending. This will help ensure that your needs are met, and that in turn will reduce stress levels. Then you can work toward getting your finances in better shape.
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Mention the word “budget,” and people’s eyes tend to glaze over. Budgeting isn’t the most exciting activity in the world, and on the surface it is extremely limiting. We don’t like it when other people try to tell us how to spend our money, and even setting parameters of our own may seem too much.
What many of us do not realize is that a budget is the ticket to financial freedom. It restricts what we spend each month, but in the long run it allows us to get more out of our money. Instead of frittering funds away on things we could comfortably do without, we can save up for emergencies as well as things we enjoy.
Here are ten tips for creating a budget, setting priorities and keeping tabs on spending.
1. Be realistic. All too often, we create the perfect budget on paper, only to completely blow it in practice. This is frequently because we are not realistic about our expenses. It may help to save all receipts for a month before you start on your budget. That way you can evaluate how much you’re really spending and avoid budgeting too little for any given item.
2. Remember the little things. Eating out every day instead of packing your lunch might not seem like a big deal, but it can really add up. The same is true for many of the habits we have. Cutting back where practical can save you more money than you might think.
3. Lower your bills when possible. A good place to start is with your cable bill. Do you really need all of those movie channels? What about your cell phone bill? Would a less expensive plan meet your needs? Knocking a few dollars a month off of your bills could leave you with hundreds of extra dollars each year.
4. Get the whole family involved. A budget affects the entire household, so everyone should have a say. You may have to make changes that everyone doesn’t agree with, but they will be more likely to accept them if you listen to all input. Family members may also have ideas that you wouldn’t have thought of on your own.
5. Give everyone an allowance, not just the kids. Setting reasonable limits for discretionary spending will help prevent your budget from being derailed.
6. Make sure the necessities always come first. Budgeting for entertainment and other wants is important, but if push comes to shove, food, water, clothing and shelter are the most important things. Budget for these and the things that enable you to work (such as transportation) first.
7. Include savings in your budget. Saving up some money for emergencies is crucial for every individual and family. Try coming up with an amount to save each month and include it in the budget before any non-necessities.
8. Keep track of all expenditures. Save receipts or write down every expense so you can compare your actual spending to your budget. If you spend less money than budgeted, consider allocating more to savings. If you spend more money than you planned, you need to either watch your spending more closely or make adjustments to your budget.
9. Avoid using credit cards irresponsibly. Buying on credit will result in less spending of money in the short run, but you will have to pay it back with interest unless the balance is paid in full each month.
10. If you get extra money, use it wisely. Consider putting it directly into savings or using it to pay down debt. Spending it on something you want might feel good, but that doesn’t help your overall financial picture.
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