To make a difference in your budget, you must analyze the expenses you've listed. This can be a daunting task, and it can take a while to accomplish. But properly analyzing and managing your budget will help you sleep better and feel more confident about getting ahead in the future. So, let's walk through analyzing a budget:
Necessary versus Unnecessary: The first step is to determine which expenses are necessary and which are unnecessary. Do you really need it? Think of whether your life change would change without it. If you aren't sure about an expense, just circle it and move on. As you work through your budget, it will become easier to decide what you can live without. Make a plan for cutting out as many of the non-necessary expenses as possible for at least one month, and see how you feel afterward. If you're still okay with it, cut that expense altogether.
Some non-fixed expenses are small, but can add up. Others are larger and unexpected, like the hospital bill after an accident that calls for an overnight stay. To keep from being swamped by these expenses, try to allow at least 10 percent of your budget for savings. Make it a goal to get at least six months’ worth of income into that account, in case of emergencies.
Recurring versus One-Time Expense: Another factor to consider is how frequently an expense shows up in your budget. For example, replacing the blown-out tire on your car, hopefully, is a one-time expense. So is the new shirt you bought after changing the tire, since you were headed to a job interview. You can't very well cut those kinds of expenses from your budget. But buying a new pair of shoes every week is a recurring expense, and one that you could probably pass on without any real soul-searching. Of course, buying new shoes sometimes isn't a problem. It only becomes trouble when it turns into a habit.
Make Decisions: Once you've analyzed your budget, it's time to make decisions. Involve your spouse and everyone in your home in this part of the process. Show them where you've identified unnecessary expenses, and discuss which ones most affect the family budget. If trips to the arcade are becoming expensive, work out a plan for limiting the trips to twice a month. Or, if someone loves golf, determine whether you could save money by joining a golf club rather than paying the fees at the public course every time. Remember that everyone is partial to his or her own indulgences, and try to find a way to keep from cutting out the pleasures of life altogether for any member of the family.
Using these tips, you'll see your budget improve. Although it may be frustrating to see your mistakes on paper, keeping up with your expenses can help you correct those mistakes rather than repeat them. By analyzing your spending habits, you'll learn more about what's really important to you and your family.
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More Great Links
- "Budget Guide - Variable Expenses." http://maxcredit.net/guides/budget-variable-expenses (5/7/08)
- "How to Bring Balance to Your Budget." http://www.expertsoncredit.com/how-to-bring-balance-to-your-budget.html . 7/21/07 (5/07/08)
- Privratsky, Shaunna. "Balance Your Budget." http://theshoestring.com/index.php?articleID=6137§ionID=146 1/19/06 (5/07/08)
- "The Spending Plan." http://www.mdmproofing.com/iym/spendplan1.html. (5/07/08) http://articles.moneycentral.msn.com/SavingandDebt/LearnToBudget/7WaysToCommitFinancialSuicide.aspx 9/7/07 (5/5/08)