I have written an article on saving money in everyday life and how to build even a small nest egg but I felt that it was important to also write an article on how to budget the money you have.
The money you have. Sounds simple doesn't it but some people have so much less to work with each month than others. This article is about budgeting for those who have very little.
My husband and I have been together for 18 years and have had our ups and downs financially. I am actually much better at budgeting during the downs because there have been so many and because when we have had our ups we tend to like to go out and buy things we couldn't have during the downs. So for now I will focus on the downs with this little piece of advice included. Budget your money for those times when you have very little and then stick to your budget when you have an up and add the extra into savings because you never know when you might hit a down again.
As I said, this article is for those of you who live on next to nothing. In the United States today that number of people grows every day and so many of them don't know how to live with less.
Your first job is to look at the bills you are paying. Make a list. Write down the name of the bill and how much you spend on it. Now look at that list. How many of these things are necessary to live? How many of these things are frivolous or extras? How much of this is credit you are paying off?
It should look something like this:
- Rent/Mortgage...........600
- Electricity....................100
- phone............................40
- cable.............................40
- Credit Card1................50
- credit card 2.................30
- insurance....................100
- car payment................250
- Food............................300
- total.............................1510
Now you look at your income each month. Now if you are anything like I used to be, you may not have the income to even cover all these expenses. However we are going to start with the assumption that you do, even if it is just barely. Let's start with saying your income at the moment is $1600. Ok so this covers your expenses with just a little left over to go out and enjoy yourself or buy a treat for yourself right? Wrong. even with this amount you are not leaving yourself room for "crap happens". The first thing you need to do is consolidate those two credit cards into one so that you are only making one payment. Even if that payment is $50 it will save you another $30 a month. That $30 should be added to an extra $20 and the $50 should be put into a savings account each month. There are other things you can do to give yourself more savings but at this point you may choose to live more comfortably since you have the income to cover it. If not then you need to see the paragraphs below about if your income is below your bills for more hints.
Now let's look at this as if you do NOT have the money each month to cover your bills and you are in that stage of juggling what needs to be paid with what can wait a month. Hey I've been there. If it's not about to be shut off it can wait. But that is a scary way to live and I want to help you not to have to do that.
Let's assume your income is only $1200 a month. Ouch, now you are about $300 a month short and things are getting scary. I've been there too. Let's see what we can cut down. Again the first thing I would do is consolodate those two (or more) credit cards down to 1 so that you are not paying such high payments on all that credit. Get that payment as low as you can. We are going to continue to assume that the lowest you could get it was $50 for now. The next thing you need to do, and this might hurt some of you, is sell that car for what you owe plus an extra $500 - $1500 and go by a used car to get you around for now. I know this is rough but you CANNOT afford that car payment. If you are worried that you won't be able to find a car quick enough, look for one first. Find something and see if they will hold it for you. Then SELL that car. That will cut off another $250 payment. If you just cannot bring yourself to buy a used car for that cheap then go to a used car dealership and buy one with a lower payment. Try to get something that is at least $100 cheaper. But because I believe you NEED to get rid of this payment I am going to continue as if you did as I first advised. I didn't put cell phone in the above list of bills but if you have one, shut it off. You CAN live without it I promise. Now you are still over your budgetable money by about $50 (more if you simply got a car with a lower payment) so we need to look deeper.
