Once you have determined your actual spending for one month, you can sit down and write out a budget that features fixed expenses (those that you can’t change such as rent, car or student loan payments, etc.) and a general idea of what you usually spend in more “discretionary” areas (what you spend on things that fluctuate or that you “want”). When you plan out your new budget, don’t forget to set aside money for savings. In these uncertain times, a security cushion is more important than it has ever been.
2. Adjust Your Discretionary Spending: Your “wants” are one area of your finances where you have latitude in how much to spend. A classic example is the name brand fast food coffee that costs $4.00 a cup. If you buy one every workday morning, that adds up to $1040.00 per year! Even if you buy expensive coffee to make at home at about $7.00/pound a week, that would only add up to $364.00 a year, saving you $676.00! There are dozens of items like this that can be pared down or eliminated painlessly from your budget.
3. Shop Around for “Fixed” Expense Sources: Changing phone, cable or internet companies might yield a cheaper rate. Competition is fierce in many areas of the country these days, especially in cities. With a few phone calls, you can shop for different prices, and even ask your current provider if they will match them. They may agree, and even sweeten the deal, in order to keep you as a customer.
4. Get Rid of, or Limit Your Access to, Your Credit Cards: Since closing your credit card accounts can hurt your credit score, the best thing you can do is find ways to keep them out of easy reach. The best method is to cut all of them up except one, which you keep on hand for emergencies – but keep it only for emergencies! You can freeze cards in ice, but if there is an emergency, you have to wait for it to thaw before you gain access. Locking the card in a drawer may be a better idea. Whatever you choose, don’t carry it with you.
5. Keep a Careful Ongoing Account of Your Spending: Designing a budget is a good start, but if you don’t track how well you’re following it, you can’t determine its effectiveness. With new technologies such as smart phone apps, it’s simpler than ever to track your expenses, then synch your device to your primary financial software on your computer at home, making it easier to analyze your spending trends. You can then take this information, find your weak spots when it comes to spending, and make any needed changes to your plan. It’s good to review your budget and true spending every month to be certain you adjust appropriately.
About our guest author: Grecia Baques writes for www.yellowbrickroad.com which offers online resume builder information to people searching for a new career.