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So you made your first budget the other day. High five! You have taken a very important step to controlling your money instead of being continuously beaten up by your payments and bills.
I left you hanging a bit at the end of that post with the instructions to put the budget away for a bit. Now it is time to look at it again and adjust your budget so you can make it work for you. I am willing to bet that you will find out some areas where you can cut back and save money.
Ready to start saving money?
Were you shocked at how much you spent in some categories? I spent that much on eating out??
How many new clothes did I buy?? Help!
Hey, it is ok. It happened to me too when I started taking control of my money. The good news you can change your spending habits now that you are aware of them.
There is one thing that you will need to understand. Adjusting your budget takes time to get it right. You will always make a few changes to your budget every month, I do it all the time. Our goal, at this moment, is to create a working budget that accurately reflects your base monthly expenses and only needs to be slightly revised in your monthly budget meeting.
If you are just starting out with budgeting, it will take several months to get a good handle on your base monthly budget. Just remember, practice makes perfect. You are starting to exercise some new muscles and they will whine and complain for a while until you get used to budgeting.
What is your immediate goal with your finances? Do you need to pay off some debt? Are you saving for a purchase? Having a big picture mindset will help you with the daily drudgery of getting there. (I am not going to lie to you and say that budgeting is fun!)
Depending on where you are at financially and what your goals are, deep sacrifice might be necessary for the short term to obtain your goals. If you have more month than money or are overwhelmed by payments going out to everyone else but yourself, then it is time to stop making excuses and to take on the responsibility to change your situation.
Put the budget on the chopping block.
First, look over all your budget categories. Is there anything that jumps out with extravagance written all over it? Does that particular category amount need to be cut drastically or even completely out of your budget?
There are a few common culprits that tend to trip up the budget; Eating Out, New Clothes, Recreation/Entertainment, and Groceries are among them.
Take each category one at a time and be ruthless, but realistic with chopping off the excess spending. Shall we start with Eating Out?
Play along with my example, ok? If my husband and I went out to eat twice a week, maybe once or twice on a couple of weekends, and spending an average of $25-30 each time, we would easily spend $250 in a month.
Now, multiple $250/month by 12 months. Yikes! That is $3,000 a year. Most of the time the food was not even that great, but we went out because I worked late or did not have anything in mind to cook or there was no food in the house. Can you relate?
What if I started cooking more at home and set a specific spending amount for Eating Out to only $100/month? I would save $150 every month multiplied by 12= $1,800 in savings. Oh, the things that I could do with $1,800! That is 1/3 of a tuition payment for the semester.
The $1,800 saved on eating so-so fast food looks even better because I was actually in the kitchen making dinner delicious and nutritious. Plus, I usually make enough to have leftovers for the next day. That overpriced hamburger, that is not all that tasty in the first place, is starting to lose its appeal.
I am getting off track. Back to the chopping block budget.
What is there not to like about new clothes? Even my husband, (who hates shopping) will wear his new clothes all the time until, well, they are not new anymore. Our example says that I spend $100 a month. That is not too terrible, I suppose, until I realize that I spend $1,200 on new clothes that get jammed into my over packed closet and some rarely get worn.
Do I really need $1,200 in new clothes every year? Can I drop the amount down to $40 a month and make do with what I already have? Ouch! This budget stuff is starting to hurt! However, changing my clothing allowance from $100 to $40/month will allow me to save $720 a year.
Part of budgeting is setting up some rules for your spending and yourself. You need to develop the self-discipline to delay gratification and put off your wants until you can afford the cost.
The more drastic you are willing to cut expenses the faster that you will get out of debt and/or save money. You will be able to have margin in your life which creates peace and 'emergencies' will not have the same urgency any more.
Check out competitors prices.
One more example (and this is one real change in our budget this month), to share with you. A second internet provider just became available in our area and when my husband called them up to find out their rates, he found out that the monthly bill would be $15-20 cheaper than what we are currently paying.
During a quick call to our current provider, my husband was told that they could increase our bandwidth (and our bill) for us. How nice of them. When Jeremy told the representative that he wanted to switch to a competitor, the representative would only come down $10 in price.
That is not enough to keep our business and we will be switching companies at the end of the month. At the savings of $15 a month, that will result in $180 saved after a year.
Just by looking at three line items so far, I will have saved $1,800 + $720 + $180= $2,700 at the end of this year. That is a pretty significant chunk of money, do you agree? What could you do with $2,700?
I gave you a couple reasonable examples of how you can go through your budget one line at a time and slash your spending. Now, it is your turn to plug the numbers in from your own budget and realistically come up with a new amount for each category. If you are married, I suggest that you chop the budget together unless you want mutiny on your hands!
Once you start really analyzing your spending habits and looking at the big picture of how much that spending will cost you over the span of the year, you begin to realize that a seemingly insignificant purchase in the moment is not as innocent as it may appear.
I chopped the budget, now what?
Continue going through each line item in your budget to see if you are able to decrease the amount spent in that category. Some categories will be unable to be touched, for example the rent/mortgage payment is always the same.
If this budget chopping has gotten a little messy, and you need to go find a corner to have a good cry about not getting that cute new shirt, since you are now not going out to dinner this weekend, go ahead. Give yourself a few minutes and then shake it off, come back and tackle your budget again. You will be glad you did. You can whip your budget into shape! I believe in you!
Rewrite your budget with the new amounts for each category. Then pinky swear and spit shake with your spouse (or yourself), that you will stick to these amounts throughout the month.
Start using cash. Take out cash for several line items that you can and put it into an envelope, one for each category. I use separate envelopes for Gas, Groceries, Clothing, Household Supplies, Gifts, and Postage, but feel free to use whatever categories that make sense for you but at least use 3-5. The important thing is that you start using cash where ever and when ever you can.
As you get paid, take out the amount of cash that you need to fill your envelopes. If you get paid weekly, take out 1/4 of the total monthly amount for that category and put it in the envelope or 1/2 the amount if you get paid bi-weekly.
Next time when you do go out to eat or buy clothes, you will physically know (and feel) how much you spend as you take the cash out of the envelope and hand it over to the server/clerk. When the money is gone, you are not allowed to go out to eat (or shop) any more, until next month when you refill the envelope.
Having chopped your budget, it should result in more money in your pocket than you thought you had and can be applied to debt or put into savings. However, make sure you keep a couple hundred dollars aside as there will probably be a couple things that come up this month that you did not expect or you were not very realistic when you slashed your grocery money. Not that I talk from experience or anything...
You are now actually paying attention to how much you spend instead of quickly swiping your card and not giving your purchase a second thought. Remember to think of the big picture and how much money you will save throughout the year by just setting a specific amount for your budget categories.
I said this earlier, but you need to be patient with yourself as you get into the habit of budgeting. The first three months will probably be rough as you find spending categories popping up that you did not realize needed to be included in your budget. Trying to adjust some of the line items, such as groceries, (one way to save money here, is to start couponing) to a reasonable amount does take some trial and error over a couple of months to get it right.
Start slashing your budget today. Even small changes on couple of line items will make a big difference over the coming year. I used three examples and ended up with $2,700 in savings for the coming year.
If you can only handle cutting two categories this month, that is fine. Plan to revisit your budget and work on a couple more lines next month. You do not have to do everything all at once, rather you need to start working on your budget today and keep making changes as time goes on.
Do you have questions? Are you lost? Tell me about it!
Please tell me how you chopped your budget and how much you expect to save in 2015.
The first two examples about eating out and clothes shopping are a reasonable guess on the original amounts, but do not reflect my actual budget numbers at this time. Both categories are much lower in my budget. Your budget numbers will be different and should be different compared to mine so follow the principle of what I am sharing without trying to copy my exact numbers.
This post was shared at Simple Lives Thursdays.
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Hi! I’m Charissa. I’m on a mission to help hardworking women overcome money struggles and gain financial peace with a Biblical perspective so they can have the freedom to impact their families and communities. Ready to make some changes that will impact your finances in 2020? Click here to get a free worksheet to help you make it happen!
Yep, those are the two categories that can get you every time! Even though we buy most of our clothes second hand, it’s amazing how many times I’ve spent $80 at Goodwill on half price day. My teenage daughter and I have so fun there, that I sometimes for get to add up as we go along. Thanks for sharing at Simple Lives Thursday; hope to see you again this week.
What a fun time with your daughter! Staying in control of how much you spend really comes down to planning ahead and being cognizant of what you are spending when you are at the store; definitely a lesson I have learned over time.
i remember when i seriously considered cutting my internet. then i said, it IS my entertainment budget, it stays. we didnt have a clothing budget either. actually we ve never had one lol
my budget doesnt even usually cover bills so everything else is always a surprise…
Helene, yes, different people will make sacrifices in various areas. The most important part is to have your budget where it covers all your bills and expenses, plus being able to reach your money dreams! All the best.