- 1). Write down the essentials. This means write down all outgoing essential bills like energy, mortgage/rent, phone, water/trash, credit card bills, insurance, etc.
- 2). Add up your totals and subtract the total of your essentials from your monthly income. The money you have left is what you have to work with on your budget.
- 3). Know that food is an essential bill where you can play with the numbers quite a bit and save quite a bit of money. Plan out weekly menus, write down a list for the items you need and take that to the grocery store with you. Buy only items on your list. You'd be surprised at how much extra money is spent at the store buying things we really don't need. When you find out the totals for your weekly shopping trip, write this number down. This will be your weekly grocery money. From here on out, when you shop for food, bring that amount of cash to the store so you don't overspend.
- 4). Pay yourself for the week. I advise you to add gas to this total. How much do you really need to spend on yourself each week? Be honest and cut back on coffee from shops or eating out for lunches. Bring coffee from home in your own mug. Even refills at a coffee shop are cheaper than buying one in the little foam cup. Bring a sack lunch. Good for your budget, good for the environment. Pay yourself this amount each week and do not take out more money. If you really want something bad enough, you will have to think if it's worth cutting into your weekly allowance.
- 5). Cut back on non-essentials. Going out to dinners, movies and such can take a toll on your household budget. Set aside a monthly 'out' night, plan how much you will need and put the money away for that purpose. This way you won't feel deprived, but you will be more in control of your spending. Avoid buying things on sale just because they're on sale. If you don't need it, don't buy it.
- 6). Tally up your expenses to income ratio. How much is left? For most people who struggle each month living paycheck to paycheck, the number might be surprising. If you don't have outstanding debt, good for you! Put this money from your budget into savings and do not touch it.
- 7). If you do have debt in the form of credit cards, pay extra on these each month. The amount of interest you pay on a credit card will usually save you more than what you are making on interest in your savings. If your credit cards do not have a balance, use the extra money from your budget to pay on the principle on you mortgage. When you pay extra each month on credit cards or mortgage, it goes to the principle and cuts down substantially on the time it takes to pay them off and the amount of interest you pay in the long run.
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