We were going to start the Saving The Family Money boot camp series once again.
So welcome to the first episode of Saving The Family Money Boot Camp! You can refer back to any of these posts by clicking on the Boot Camp category here.
The first thing I recommend you do is create a budget. If you have one, now is the time to reassess it and determine what’s working and what isn’t.
Here are Tips to creating a budget and make sure you scroll to the end and see how to get the free budget worksheet.
Step #1: Write down all of your monthly expenses. Include anything with a yearly payment as well, like Homeowners Association fees, or car tag renewal fees. The best way to do this is gather all of your financial information from 2009, including bank statements, bills and investment statements. Another way is to track your spending for a month. Write down everything you spend money on for a full month. You might be surprised where it’s going. Here’s a quick monthly expense list to get you started:
Insurance – Homeowners/Car
All of my newsletter subscribers will get a free budget savings worksheet. The yearly bills should be divided into 12 months and put into savings each month, so that you will have the money when the bill comes in. Nothing is more frustrating than have to pay a huge bill in the middle of the year and having to scramble to find the funds. If you budget for it, it will not become a stressor.
Step #2: Write down all of your sources of income. Salary (Net Income or take home pay), other sources of income.
Step #3: Total all of you expenses and all of your income. Are you bringing in more money than you are spending? If so, you are off to a good start. If not, you need to see where you can cut back.
Here are a few tips:
- Call your local electric or water company and see if you can be put on the budget plan. Every company calls it something different but essentially it makes all of your monthly payments the same, instead of fluctuating monthly. Does your water bill sky rocket during the summer when you’re watering the yard more? You will typically have to be in your residence for at least a year, so that they can take an average over the course of the year. We normally spent under $100 a month on our water bill during the winter, but over $15o during the summer. Now we pay $122 every month. This helps out our monthly budget and we are not ‘surprised’ every month when the bill comes in. They can reassess yearly if your usage changes significantly. Many companies will do this for you. Try calling your car insurance company, and many others.
- Reassess your taxes. If you get money back when you do your taxes, you may want to reassess the amount your employer is taking out of your pay checks. Some people enjoy that nice little ‘bonus’ in April, but I prefer to keep that money in my pocket and earn interest on it, instead of the government ‘holding’ onto it for us! Just make sure you don’t withhold too little and owe them money later. The IRS has a withholding calculator that you can use to determine your withholding. We adjusted ours one year and still got money back, so we adjusted it again. Take baby steps if you’re nervous about it.
- Consider maxing out your 401K contributions. 401(k)s let you put money from your pretax salary into a tax-deferred investment account that you control. Contributions reduce your taxable salary and you don’t pay taxes on either contributions or earnings while you’re building the account. If you can afford it, you should contribute at least enough to take full advantage of any company match.
- Start a savings account. This is a important for job loss or unexpected household repairs. My husband’s company allows you to get your paycheck direct deposited and you can even split that into several accounts. We’re going to agree on an amount and have that deposited into a separate account from our everyday spending. This will be money we only touch in an emergency.
- If you have money left over after all of your expenses are paid, consider paying yourself by giving yourself an allowance. Even if it’s just $10, you’ll have that $10 to spend guilt free on yourself. If you and your spouse get a “guilt free fund” then you don’t have to explain to each other how you spent it. Get that cup of coffee before work or save it up for a new pair of jeans.
- Account for every dollar. Start carrying around a small notebook with you and write down any purchases you make. It’s the small purchases that can get out of hand. You may realize you are spending $100 a month on coffee or $50 more on gas than you originally thought.
- Differentiate between needs and wants. If you need to cut back, ask yourself if items on your budget are a need or want and assess them as a family. For example, is cable tv a need or a want?
Set realistic goals: If you typically spend $400 a month on groceries, try cutting that back to $350 and start clipping those coupons. Baby steps work for us. Cutting everything back cold turkey is just unrealistic.
*Disclaimer: This information is written by me, wife, mother and CFO of my household and should not be considered professional advice.
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