Monday, April 26, 2010

Money Mondays...Be aware of what you're spending and where....

It's another Money Monday and no I don't have any great bargains for you, or where to get free stuffs, etc. I won't be putting that stuff in here. There are a WHOLE lot of other blogs out there just for that purpose. Last week, I mentioned living below your means as a way to accomplish debtlessness (is that even a word?). That is SO much easier said than done. Does that mean that you eat only beans and cornbread and bologna all week long? Not in the least. Does that mean that you might not get a new console game every month? More than likely. Most people want to put aside a little money for emergencies, or their children's college tuition, or even for their retirement. Really when you think of it, you will have one savings for retirement, one for emergencies, one for each child's future tuition, before you know it, you'll not have any money for bills. And unfortunately, unless you can afford to do that AND eek out a current living, that's not a very practical stance to take. You might even say that you cannot afford to save any money because your current living expenses out weigh your income. That's when you need to evaluate what's important to you, and what you can let go, and what you can pay off early to relieve yourself of your monthly debt. You might even want to keep an expense journal for 30 days just to see how you DO spend money. But for that 30 days, you should just keep the receipts for all your transactions, and your bank statements as well as your payroll checks. This way you see exactly what you have coming in, and just what you spend going out. This means even that 89cent burrito from Taco Bell. Keep that receipt, because this adds up over a year's time.

After your 30 days is up, go through all those receipts. Get you some envelopes, mark them, "household", "entertainment", "car", "grocery", "eating out", and "misc.". In the "household" envelope put your rent, utilities, and home insurance (if your car insurance is also attached here, that's fine, put it here in the "household" envelope)/renter's insurance, etc. The "entertainment" envelope, will carry your cable, internet, movie stubs, games, rentals, netflix, gamefly, etc. "Car" envelope is car maintenance, car payments, car insurance (if alone), and gas. "Grocery" is just that, groceries, that you purchase at the store. "Eating out" should be self explanatory, and is NOT to be placed in the "groceries" envelope. If you can't cook, there are THOUSANDS of sites on the web that can help you, and this is infinitely cheaper than eating out for a week. The "misc." envelope is for things that don't fit in here like if you pay your health insurance out of pocket, savings, etc. After you separated those receipts, you should tally up each envelope and see where the bulk of your money goes. You might be surprised just how much actually goes to entertaining yourself, or what goes into the "eating out" envelope.

After you figure out HOW you spend your money, next you should look at it and evaluate just what you need to do to lower some of these expenses. Generally, your household and car are pretty fixed. Depending on what's in your misc. on whether or not that's flexible. Otherwise, groceries, entertainment and finally eating out are the most flexible. You could cut out your eating out to just 1 meal a week. Decide how much an average meal is, and put that amount aside. The rest is surplus to go towards groceries, because more than likely, you'll be spending more money here. HOWEVER, with careful planning, and smart shopping, this expenditure could go down as well. I have friends who've given themselves spending limits on the flexible expenses.

One friend uses an envelope system. She allots herself only $"X" for groceries per month. And she splits that over the 4(average) weeks per month, and that's all she takes the store with her. This buys all her groceries as well as her toiletries, etc. And she can adhere to that, because if the cash isn't there, she can't spend it. This same friend also relies upon her menu to help her out. I'll talk more about menu planning next week and how it can greatly save you money.

Just being aware of how you spend your money could greatly reduce how much you actually spend.

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