First, determine why you want to budget. You and your family need a pretty good reason or you won't feel obligated to do what it takes. Do you want to get out of and/or stay out of credit card debt? Or save for a new car or big vacation? Whatever it is, you need a reason so that you won't be enticed to overspend. Write down your reason or goal where you see it every day.
Second, examine your family spending. Are you tracking your expenses often enough? If you aren't looking at your expenses every few days, you probably have no idea how much money you have and where it is going. Spend a few minutes each day or at the end of the week updating your records instead of saving it all for the end of the month (or tax season).
Third, recognize why and where you are overspending. Look at your expenses and see where you've crossed the line. Did you have a large, unexpected medical, house, or automotive expense? Does this happen frequently? Establishing some short-term savings can help cover these expenses when they occur.
Begin thinking of things in terms of what it costs you over a long period of time, such as a year. For example, if you pay $3/week to withdraw money from your ATM, that's over $150/year. Instead limit withdrawals to twice a month (or less) and that's over $75/year in your pocket!
Below are some other ways to reduce both mandatory and discretionary expenses while sticking to your budget:
- Increase your car insurance deductible to $1000.
- Shop around for better insurance rates.
- Conserve utilities when possible.
- Consolidate your credit card and other consumer debt into a home equity loan and then cancel the cards, cut them up, and don't apply for new ones.
- If you are renting, try to buy a house; tax advantages for paying home loan interest often make it cheaper to own than to rent.
- Eat out less; brown-bag your lunch; find less expensive places to eat.
- Find cheaper entertainment (rent a movie instead of going out to one).
- Consolidate errands to use less gas.
- Limit grocery shopping to one day a week; shop at more than one store for groceries, if time permits.
- Shop around for a better long-distance calling plan or cell phone plan.
- Borrow books from the library instead of buying them.
Would you like more information: Read about budgeting ideas that work.