One of the first steps to saving money is figuring out your household budget. By writing everything down it is an easy way to see where your money is going and where you can cut back.
If you have never done a budget before start by writing down all your fixed expenses. These would be
Mortgage/Rent
Utilities
Insurance
Car Payments
Groceries
The total should not be more then 50% of your income. If so you have a house or car payment that is too high for your income.
To keep your budget running smoothly you will need a system in place to keep tract of all your bills. Not only will this help you keep track of what bills to pay with each check but help you avoid late fees. I found a great system that I use at Simple Savings. You can register for free to see how to set up your own bill management system and also print out worksheets to keep tract of your bills.
Next, keep tract of your day to day expenses for a couple of months. Once you have a feel for where your money is going you can look to see where you can cut back.
In addition to budgeting for your expenses, you need to include savings. You should be putting away 10% to 20% of you income. The easiest way to do this is with an automatic deduction. That way it is taken right from your check and you do not even miss it. Plus it is a way of paying yourself first. This will be the money to go towards retirement and college funds.
Once you have a clear picture of your expenses it is time to make sure that you are prepared in case you lose part or all of your income. The rule used to be having an emergency fund to cover 3 months of your expenses. Now the experts are suggesting 6 to 9 months, since it is now taking people 6 months to 1 year to find a new job. If you are in fear of losing your job then it is recommended that you stop putting money into your savings (unless your employer is matching) and stashing as much as possible into your emergency fund. That way if the worst happens you will have the best chance of making it till you find another job.
Once you have a your budget figured out, it is important to stick to it. I find that using the envelope system works best for our family. I have separate envelopes for expenses like groceries, gas, cloths and entertainment. I put the allotted amount in each envelope on payday. Then I know when the money is gone its gone. It really helps to stay within my budget. If I am under budget then I put the money into a savings account that we have for a family vacation.
The important thing to remember is that a budget is not meant to make you feel restricted. The intention is to become more aware of your spending. It may take some time to get things going smoothly, but when done you may actually find out that you have more money then you thought.
Jennifer Billy
