BUDGETING: IT’S EASY MONEY

WRITER: SAMANTHA KAY

Following a budget often feels like punishment because most budgets are introduced to get rid of debt and improve a financial situation. Some people think it means cutting out enjoyable spending and losing all the fun in life. That is not what a budget is at all. It creates opportunities and increases quality of life, regardless of present circumstances.

Low-income individuals are not the only ones that need to follow a budget. No matter what your income, a budget is meant to maximize every dollar and prevent financial disaster. Using a budget properly allows you to enjoy life without overindulging at the expense of important financial matters. It brings balance and security to your finances and stress level. A proper budget can help those in debt and those with excess monthly income alike.

Budgets include several spending categories with monthly or weekly limits. In the beginning, estimate and make assumptions. If possible, spend a month or so tracking spending to get a better idea of where your money is going. You may need to adjust categories as time goes by if some limitations cause problems.

Your first category should be savings, including retirement contributions and building an emergency fund for at least six months of living expenses. Pay yourself first by subtracting your desired savings from your total monthly take-home pay. Consider this a hands-off category that you can’t adjust. If changes need to be made, make them with other spending habits. However, set a reasonable savings goal. Try to save at least 5 to 20 percent of your income each month.

Next, subtract your total fixed expenses, including rent or mortgage payments, cable, insurance, and other bills that stay the same every month. Variable expenses fall into two categories—necessary expenses and extra expenses. Necessary expenses include food, gas, utilities, etc. Estimate high to allow for higher cost months. Extra variable expenses are eating out, snacks, coffee, books, music, clothes, electronics, and anything else not considered an extra or unnecessary expense. You can make this a single category, or split it.

After subtracting savings, fixed expenses, and necessary variable expenses, the remainder of your money goes toward the final extra category. Did your money run out before you finished estimating categories? Do you have a small amount leftover for extra spending or is there more than you would normally spend in a month? It may take some time adjusting in order to get your categories where you want them.

If you are accustomed to spending an excessive amount of money and saving nothing, you may feel deprived. However, excessive spending gets you in more debt, and may keep you from retiring or achieving other important financial goals. Learn how to live on less and enjoy life in ways you don’t spend money. Soon, you won’t miss going out to eat every night or buying new clothes every weekend.

Learn to cut back in other places if necessary. For example, shop with coupons and sales to cut back on groceries, cut out cable if you don’t watch television enough to justify it, and learn to save money on gas. If you are in the process of getting rid of debt, you may want to cut extra spending altogether resulting in a lot of free time. To fill that time and to get your debt paid off faster, get a part-time job. In fact, a part-time job is a great way to increase income and savings whether you have current debt or not.

A budget isn’t supposed to be a new restriction. It’s meant to show what you really can afford. If you feel restricted, you are living above your means. Cut back on spending or find a way to make more money. Don’t value money more than your life and your relationships. Learn how to manage money to maximize its benefit.