COMMENTS FROM CHERYL
The new year is starting and now is the time to improve your spending for 2011. The average family can increase the money available for spending by as much as twenty percent, just by paying more attention to where their money goes. Try spending an hour or two each week to look more closely at where your money goes. The results will likely surprise you.
This is not an easy task and the first step is the hardest, but also the most important. You need to know where your money goes. Once you know where your money goes, it’s usually easy to spot areas where change is needed. To see if you need to pay more attention to where your money goes, try this simple activity.
Without referring to any records, write down how much money you have available for spending in a typical month (your income). List your usual monthly expenses, including the amount you normally spend every month for each expense.
Add up all your expenses and subtract the total from your income. How much money do you have left over? Is this money actually left over each month or is it that you just cannot account for it?
If you can’t account for the difference, you’ve been robbed and the guilty party is most likely you. Now it is time to find those missing dollars.
Start with bills. Most of your money probably goes toward bills for utilities, debt payments, and services, such as cable television or telephone service. The nice thing about bills is that it’s easy to know exactly how much you spend each month. The amount is printed right on the bill.
Keep an eye on your pocket money. The biggest source of leaks in the family budget is the cash you and other family members carry around with you each day. Keep a small notebook in your pocket or purse. Use it to record all your spending as it happens for a few weeks. The longer you keep track, the more you will learn about where your money goes.
Condense your spending into categories. Detailed records are nice, but often make it hard to see the bigger picture. Organize your spending into a dozen or so categories that make sense to you. For example, lump natural gas, electric, water, telephone, and cable bills into one category you call “utilities,” and all of your credit card and loan payments into “monthly debt payments.”
Add it all up. After you have kept track of where your money goes for a month, add up how much you spent in each category. If you’ve paid close attention to where your money went, the total you spent should equal your take home pay for the same time period. If the total for spending is less than your total income, you need to keep tracking your spending to find out where those missing dollars are going. Assess your situation. Take a look at each expense category, and decide whether the total is too much, too little, or about what you think it should be. Especially if this is your first hard look at family spending, there are usually one or two categories with totals much higher than you might expect. These categories often include things you do frequently, perhaps even daily, such as smoking, picking up coffee to go, or eating out. Once you know where your money goes, it’s easy to identify areas that need attention.
Once you know where your money goes, it’s time to act. The following steps can help you to develop a plan for reining in spending that may be keeping you from reaching family goals.
Target one or two problem areas at a time. Once you see where your money goes, it’s often tempting to try to make drastic changes in your spending habits. Drastic changes rarely last. You’re much more likely to be successful if you focus on one or two areas at a time. Work on those areas for a month or two. Once your new spending habits become an established part of your routine, you can tackle additional problem areas.
Involve everyone in the household. It’s hard to make changes when you feel like you are the only one putting forth effort. You are more likely to be successful when everyone in the household participates toward accomplishing the same goal. Talking about the family budget and how to reduce spending, can also help prepare your children to successfully manage their own finances.
Ask family members for suggestions about how to improve in the targeted areas. Encourage everyone in the household to come up with one or two suggestions for how to cut spending for the targeted expense. Make a list of all the suggestions, and then talk about the advantages and disadvantages of each idea. When other family members feel like part of the decisionmaking process, they are more likely to work with you to accomplish what you set out to do.
Make sure everyone in the family enjoys the rewards. It’s a good idea to decide up-front what you will do with the money your family saves by reducing spending for a particular expense. Family members will be more committed to the task when they know what the reward will be, and how the savings will be used. Be sure that at least some of the money saved gets put in the bank, for family goals or in case of emergencies. The more creative you are in coming up with a reward that everyone will enjoy, the more fun the experience can be for the entire family.
Remember getting your spending under control can help stretch your money for 2011.
The resource for this information was from The University of Georgia Cooperative Extension. If you would like additional information, contact the Texas AgirLife Extension Service–Milam County Office, 100 E. 1st Street in Cameron, 254- 697- 7045.