Getting Control of your Finances
Jan 18, 2012, 18:00
I’m sure there are many better money management columns than this ridiculous site but this is my take on budgeting and managing your money.
Do it. That’s it, just do it, make a budget.
Putting together a budget is surprisingly easy to accomplish with a little time and Microsoft Excel.
The simple fact of making a budget doesn’t mean you need to stick to a particular monetary schedule. But making the budget in the first place will let you know where you money goes so you don’t think that it is an endless pit.
Back in the “old days” before credit cards were so easy to get and fill up, you needed to be conservative with your spending so you would have cash left over at the end of the month. Not so today. If you outspend your means then just chalk it up on your credit card and think about it later.
This is one of the reasons I did not have a budget line for credit cards on my spreadsheet. Having this defeats the whole purpose of having a budget.
Live within your means.
Ok, not so easy. Joey next door has a new car, and Chandler on the corner has a new boat, plus Ross and Monica put in a new pool. What you don’t know is that they don’t actually own any of that stuff and the credit card companies own them.
But I digress. My budget starts with my monthly income; everything else gets subtracted from this.
Your best bet is to keep this as simple as possible. You have necessary expenses, without which you are homeless and hungry, so the top expense is housing, the next is food budget. The important part here is not to have “going out to dinner” as part of the food budget. This is entertainment, which comes later.
After the big 2, you have your “I’m not homeless but its dark and cold” expenses. Heat, electricity, gas, and water.
The next tier is phone, cable and internet, plus anything else that keeps your life going, including travel expenses (car, train). I put these all together because if you are out of money before you get through these it’s time to reassess your job, because these are basics. And if you have enough money, it doesn't necessarily mean you should splurge on fancy deals.
Here’s the trick however. This is about as far as you need to go. You might want to augment the above tiers with dry cleaners, laundry, etc, but if you keep it simple like this the rest becomes as easy as picking off the dollar menu at McDonalds.
After all these basics you have X dollars. Let’s say $250 (hopefully more).
If you simply list any other expenses, such as a nice dinner out, sports tickets, your afternoon Latté you at least know what the pool of cash you are dealing with is, and that’s the trick.
Most of us reach into our pocket and don’t think about where the dollar is coming from, but once you know the real number you are arming yourself with the data to make a financial choice.
This becomes as simple as ordering in a pizza for $20 instead of going out to the restaurant for $80 because you are choosing to get that cool new tech gadget this month.
Not being able to get everything you want right where you want it is what turns most people off. You think ‘if I do a budget I can’t go out to dinner, AND I cant’ order the pizza’. The reality is you get to choose, and with that choice is the opportunity to do better.