The Life Skills Network bloggers got together and decided that we would post a group project for the Spring. Our topic? Rejuvenation. After all, it IS springtime!
To rejuvenate is defined as
to make young or youthful again : give new vigor to : to restore to an original or new state : to stimulate : to uplift : to renew : : to make like new : restore to freshness
Photo by jody9
Could your personal spending plan (your budget) use some renewal, some new vigor, or some freshness?
1. Examine your fixed expenses
If you’ve neglected your budget for some time, to breathe new life into it, you’ll need to get it ready. Pull together your financial records, bank statements, credit card statements, and other information on your fixed monthly payments. These payment amounts are determined by others, not you and usually your fixed expenses are mandatory outflows. They must be given a high priority.
2. Examine your variable expenses
These could include dining out, personal care (haircuts, etc), gym memberships, clothing, vacations, entertainment, pet care, and gifts for others. These outflows are not written in stone like fixed expenses but vary from month to month. The beauty of variable expenses is that if money is tight, you can easily cut back on these.
3. Factor your potential emergency expenses
Having a healthy emergency fund in place is a key step to your budget renewal plan, but make sure what you consider emergencies really are emergencies. New tires, your semi-annual car insurance premium, and your ten year anniversary gift to your spouse DO NOT qualify. Let’s be honest, you know those expenses are coming. The only reason they’re “emergencies” is because you didn’t prepare for them.
True emergencies are those that completely blindside you – your home heating system dies, your car’s transmission must be rebuilt, an unexpected medical expense surprises you. Those are true emergencies and having a healthy emergency fund in place will insulate your checkbook from resorting to credit card debt to cover them.
Always, always always set aside money for your emergency fund.
4. Decide where your money should go … and why
Give every dollar a specific job. You have to decide where each dollar will go, and why. Only you can decide what’s important so use this exercise to determine your priorities:
If you had enough money to pay for only one thing, just one, what would it be? If you have just enough to spend on one more thing, what would it be? Continue making these decisions until you’ve exhausted your list of expenses. Now you know what’s more important and what’s less important.
For me, food was number one, followed by housing, utilities, automobile expenses, medical bills (I have a child with an autoimmune condition), insurance, and so on down the list. Make sure you include savings — it comes before entertainment, vacation, dining out, dry cleaning, cable television, high speed internet, gifts, personal care, and clothing for us.
5. Avoid cutting too much
When creating or renewing a budget commitment, too many people cut too deep and begin to regret it. As a result, they create a budget they can’t keep because it feels like they are giving up everything.
To avoid feeling like you’ve cut too deep:
- Substitute – what can you exchange? Your gym membership for a home workout? Your Starbucks habit for a home espresso machine? Your dining out for lunch for a lunchbox?
- Reward yourself – set up short term as well as long term goals for your budget and rewards that go along with accomplishing them.
- Downsize – move to a smaller more fuel efficient vehicle, downsize to a smaller home, downsize the clutter in your attic, your furniture, your lifestyle in general.
6. Concentrate on making more money
Why isn’t making extra money at the top of the list? Increasing income without a budget in place to handle it will only see those extra funds slip through the cracks and vanish. When you have a budget in place, extra money goes where you want it, hopefully to debt reduction or to your savings and investment plan.
How long will it take you to get your budget back on track? That all depends on your situation, including how much or what kind of debt you have, your personal priorities, and your income level. But spring is a great time to get started!