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Feb. 2, 2007
How to prepare your budget
(And some ways to help make sure that you don't abandon it.)
DVORA WAYSMAN
There are lots of jokes about running out of money, and most of
us have made them at some time: "Too much month, not enough
paycheque"; "The money runs out before the month does";
"The harder we work, the behinder we get." We may laugh,
but beneath the irony is the serious problem of dealing with a budget
crisis every month.
Our income is generally fixed, but the outflow seems to increase.
If we spend too much, the shortfall gets added to the debt load
we are already carrying. Then, as our debts increase, more of our
income is needed to cover the debts. It is not a funny situation
at all.
Many of us spend 10 per cent more per month than we make. There
are basically only two ways to remedy this – either reduce
expenses or make more money. This is true of both personal and national
budgets.
Whenever gift-giving holidays are on the horizon, shopping especially
needs a budget. There are several steps to prevent getting so swept
up in the spirit of giving that you go into debt, including restricting
the number of people you have to buy for, deciding in advance how
much you can afford and leaving your credit cards at home when you
shop.
Apart from your gift-giving budget, you need to save on family necessities.
Take an inventory of your current needs and study where you can
cut costs. Begin with the biggest item first, where there is most
potential for savings and move down the scale. Even a modest saving
on houses or cars, for example, can bring a big reward. Here are
a few tips:
• A mortgage may be your biggest expense. Are you getting the
best rate? Investigate your options. Even a difference of two per
cent a year can add up to thousands of dollars over time. Compare
what the different banks are offering.
• Normal maintenance of a home takes money. When you need to
make repairs or improvements, the cost can go through the roof.
Once again, comparison is the key. Get a number of bids from all
the contractors in your area.
• For many families, the next biggest expense is the car. Is
it too big and luxurious for your needs? Maybe you could downsize
to one that uses less gas, has lower insurance and maintenance costs.
If you are paying it off, your monthly bills will be less. Don't
always use the same garage when your car needs servicing. Check
whether you can get comparable service for less money.
• Another consideration is the amount you pay to others. Could
you manage with a cleaner once a fortnight instead of once a week?
Might you learn to do the garden yourself and save money? You could
even end up finding yourself a healthy hobby that you'll grow to
love.
• When your spending is out of control, write down each day's
expenditure for a month. With this record, you can decide what you
can live without. You might cut out dry cleaning and do your own
ironing while you watch TV. You can't avoid paying for food, housing
and utilities, but you can trim the costs. Insure only those things
you can't afford to replace. Watch movies on TV as a family, instead
of all going to the cinema. Pack a picnic for an outing instead
of going to restaurants.
With even small amounts that you've trimmed from your spending,
eventually you'll get out of debt and be able to save. Once the
debt is paid off, the savings habit will stand you in good stead
and help you start to build a nest egg. Budgeting is not the same
as deprivation; it is intelligent spending that gets you what you
need, without ruining your finances forever.
Dvora Waysman is a Jerusalem freelance writer.
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