Budgeting to stretch your dollar

Our perception is typically that we spend our money wisely on necessities but we are all somewhat surprised by how quickly and where our money goes. To stretch our hard earned dollars, reduce debt and save we need to set up and stick to a budget. No matter what a family’s financial situation, setting up a budget for your household will make dollars go further. Despite the fact that our skill levels range from expert to novice, setting up a family budget is not daunting.

Budgeting is systematic. It is a way to achieve financial discipline by changing the way you think about money. Many steps need to be taken and applied when creating a budget. It needs to be planned out with your family in an honest and willing manner and joint decisions made. It is essential that sacrifices are identified collectively and each family member must understand their part in accomplishing goals and creating the future they want.

One key element is communication, particularly with your spouse. You need to understand one another’s role and perspectives to set up a budget that will work. To increase your chances of being successful you need to discuss your attitude, expectations and motivation to work consistently together.

Encourage members of your household to talk with work colleagues about ways to budget and save money. Read widely and consider how you could make suggestions work for your circumstances. View your first budget as a trial and keep everything that works and discard or replace the elements that are not practical.

Talking about the family budget needs to happen before there is a crisis. You need to work together to set up a workable budget that will be right for your needs. Set up a draft budget and see how this works over a month or two. You will soon be able to determine what things you have neglected to budget for.

A good place to start is to make detailed lists of all expenses. It is helpful if you categorize. Living expenses would include food, home expenses like cleaning products and gardening, lunches for work and school, clothing, newspapers, stationary and postage. Family expenses might be child and elder care, pharmacy, veterinarian if you have pets, health and life insurance and doctor and dental. Dining out and take away meals, vacations and weekend or day trips, books, movies and rentals would all be placed in the recreation category.

Some bills must be targeted as very important and those are the ones that you are under an obligation to pay. If you enter into a formal contract like taking a student loan or having a credit card you must meet the conditions of the agreement. Student loans, child support, alimony, and charitable donations would all be listed in this category.

Your home will be one of your major budget items. If you have a mortgage you will also need to budget for insurance, property taxes and services and maybe your neighborhood homeowners’ association membership. If you are renting your home you need to meet your rental payments on time. Whether you are renting or paying off a home you will need to budget for heating and cooling.

Some places do not have huge temperature fluctuations and walking or riding to work and school is possible year round. This saves on fuel and maintenance of the family car. Public transport is also a good cost cutting way to travel. More and more people are car pooling and this makes sense if you travel at the same time to a similar destination. Some big cities promote car pooling by allowing vehicles with more than two occupants to travel in the faster bus lane.

Financial discipline does not happen overnight. You need to work consistently to make a real difference in your spending and saving patterns. It may not be possible to reduce some costs but with a determined effort you will find it financially easier to meet these. Good luck.

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