(WXYZ) - As you move through 2010, Budget Wise Consulting's Robin Thompson has some tips you can keep in mind that can help you keep more money in your pocket.
Robin's first tip is to:
1. Develop the right mindset about budgeting.
She says: "A budget isn't meant to be restrictive. Its purpose is to help you to stretch your paycheck. The people who budget and follow it get out debt faster, eliminate their reliance on credit cards, save more money, lower their stress level, and stop fighting about money with their spouse. So, a budget will actually create more freedom for you. Don't forget to include some money you can "blow" in your budget."
2. Begin by looking at the big picture.
"This means to determine your overall goals. Goals help you to stay focused. A goal is similar to having a vision for what you want to do, to become or have, such as saving for a relaxing summer vacation, having startup money for a side business (your Plan B), or planning for an emergency fund."
"Write down how much the goal (s) will cost, when the money is needed, and the amount of money you must save per month to achieve the goal (s). Goals should be specific to guide financial behavior."
3. Get organized.
"Compile paychecks, receipts, check registers, bank statements, and account statements to determine all sources of income and how the money is spent."
4. Write down the following expenses.
a. Fixed monthly expenses
b. Variable monthly expenses. If you haven't saved those receipts, write down the exact amount of money you spend for one month. The first step toward controlling expenses is to understand how the money is spent.
c. Non-monthly expenses. The missing link to managing your finances is not having an accurate estimate of non-monthly expenses. This explains why shortages may occur. Consider the money you need for car maintenance or repairs, insurance payments, lawn care, and additional costs for wedding, baby shower or birthday gifts, and back to school shopping. The price tag extends well beyond monthly obligations. You may need to save as little as $100 and sometimes as much as $700 per month to cover these expenses; however, it is easier to save for these items over time than to struggle when bills are due. It is far worse to charge these things on a credit card.
5. Do the math.
Subtract your total expenses (fixed, variable, non-monthly, and goals) from your monthly net income (take home pay).
Is the difference (net cash flow) positive, close to zero, or negative? If the difference is negative, you definitely have some work to do.
6. Figure out how you can spend less and save more.
"Now that you've constructed a budget, examine it closely. What expense can you eliminate, get for a lower price, or minimize its use? Don't forget to go after the dollars not just the pennies, meaning, cut back on larger expenses. For example, refrain from buying a new car when the lease is up for renewal but instead buy a used car."
"The "Found Money" should be applied to repay debt, save, or invest."
7. Control the plan to ensure you don't overspend.
"You must overcome the habit of impulsive spending. One option is to track day-to-day expenses. This is only helpful if you use this information to adjust spending throughout the month. Otherwise, if you wait until the end of the month to evaluate your spending, then it is similar to managing your money by looking through a rear view mirror."
"An alternative is to use the Envelope System (physical or electronic). I suggest that new budgeters use actual envelopes because you will see the cash and think twice before spending it. I'm convinced that the convenience of "swiping" a credit or debit card has done more to chip away at our finances than improve them."
8. Compare.
"Compare your estimated spending to your actual spending on a monthly basis. A written plan is not beneficial if you do not measure your progress."
9. Make adjustments.
"Your first plan will not be perfect but it will improve with time and experience."
10. The final step is to implement your Cash Flow Management System by setting up different accounts.
"You should have one Checking and two Savings Accounts. Set up automatic recurring withdrawals from checking to savings for Non-Monthly Expenses (Savings 1) & Emergency Funds (Savings 2)."
