Often, we look over our checking account balance and question, "Where did all the money go?"
Even if you seem to make enough money to make ends meets, sometimes, you still come up short.
It really is surprising how the little (and sometimes not so little) things add up.
The next time you have a depleted bank account and wonder what happened, look through each expense (including ATM withdraws) to see exactly where you spent your money. If you need money fast, you can always use payday loans to help fight off the insurance company, for example.
You may be surprised to see how many of your expenses are actually unnecessary.
And it's always good to bear in mind that you will always have those simply unplanned expenses, which are listed here.
Expenses really have a way of adding up!
Let's look at the chart below to see a few things that can really sneak up on a family in just one month:
As you look through the list, you can see that many expenses are unnecessary. It may be difficult to see that going out for your anniversary is unnecessary, but if it is unplanned and other bills are not being paid or racking up late fees to compensate, can you really afford that night out?
Often, we spend money on things that add up quickly because we like to “reward” ourselves.
For example, going out to lunch every Friday with co–workers after a hard work week, or just one latté a week or pizza on Saturday because you worked all day long on the house and don’t feel that you should have to cook, are all rewards that may really take you to the bank.
“Rewards” are nice, but costly, as you will clearly see below.
So, how can you “reward” yourself and yet maintain a budget?
Turn unnecessary and unplanned expenses into PLANNED expenses.
Theoretical Expense Chart:
|unnecessary||Lunch with coworkers (once a week, both parents)||$85.00|
|unplanned||Dental Exam, co–pay||$20.00|
|unnecessary||Daughter sends an extra 2000 text messages on cell phone||$213.00|
|unnecessary||Ordered pay per view movie||$4.99|
|unnecessary||ATM fee, non branch withdraw (once every weekend)||$16.00|
|unnecessary||Chinese food take out||$36.75|
|unnecessary||Credit card late fee||$29.00|
|unnecessary||Credit card over–the–limit fee||$29.00|
|unplanned||Winter heating bill, over the average||$120.11|
|unplanned||Flat tire repair||$12.65|
|unplanned||Sons overnight basketball tournament||$120.00|
|unnecessary||Soda from convenience store (once a week)||$4.84|
|unnecessary||Checking account balance drops below free checking range, fee||$12.00|
|unplanned||Kids winter coats and gloves||$141.63|
|unnecessary||Mocha latte (one/once a week)||$18.12|
|unnecessary||Anniversary dinner and night out||$155.38|
|unnecessary||Pizza and movies for kids||$37.66|
Using the example above there is $693.72 in unnecessary expenses, $324 of which could have been avoided completely! Using this example, if this family had paid their credit card bill on time, used a branch supported ATM, put a few more coins in the parking meter and restricted their daughter’s cell phone texts messaging, they could have spent $324 less.
If the family plans for one lunch out/month (per parent), two lattés/month and one take out dinner/month, they would spend over $140 less. To budget for these “rewards” this family would need to set aside about $70 per month.
In terms of unplanned expenses, this example has a total of $414.39. These expenses include their kid’s extra curricular activities and clothing as well as medical co–pays, car repairs and winter heating. These items, although not regular expenses, should be budgeted. Winter and school costs come around every year, if you use the above example, the family would need to save $34.53 each month to cover the expenses. Since every month includes extra expenses, such as in the summer kids need new bathing suits, baseball team dues/gear added to the fact that the air conditioner runs all day, the $34.53 is not going to cover it.
Therefore, you may want to assume you need $400 every month and $100 should be set aside every week to cover extra expenses. If you can manage this, the unplanned expenses are now planned and budgeted and should not cut into the money you need for your regular payments.
So what about that anniversary dinner? Not to mention birthdays, Christmas and summer vacations? If you are not paying bills to cover these expenses you cannot afford these special expenses. If you are using your credit card, and not paying the entire balance within a month, you cannot afford these luxuries.
If there is room in the budget, these special expenses need to be turned into planned expenses. Instead of charging up your credit cards at Christmas and paying all year, reverse it; pay yourself all year to fill a savings account to pay for Christmas and other holidays. Why not collect interest instead of paying interest? Even if you just put aside $50 per week, you would have $2600 set aside by the end of the year.
For the “reward” lunches, dinner and the budgeted extra and special expenses the family needs to put aside $670 per month. This is still $448.11 less than the unplanned, unbudgeted (and out of control) month. Not to mention, there are likely numerous other ways the family could save money.
Many parents have a hard time discussing budget issues with their children. If their child’s birthday is coming up, or they want an expensive toy, they have a hard time saying no and might feel as if they are failing their kids by not providing them with their every want. However, by not teaching your kids – realistic budgeting, planning and the true cost of living – are you not also failing them?
Budgeting and planning can be a family event. Kids can learn how to plan for additional expenses, budget realistically and the importance of avoiding unnecessary costs before they are out in world and facing them on their own.
If you Still Cannot Make Ends Meet
If the budget you need is not equal to or less than the income you receive, then either additional expenses need to be cut or take home income increased. The math is simple.
Sometimes drastic changes have to be made. This may include moving into a less expensive home, selling a vehicle, changing jobs or taking on a second job. These alternatives may not be easy to face, or may not match how you want your life to be, but if the numbers don’t add up, change is the only option.
To read some money saving ideas please see, Cost Effective Living .
To find out the best budgeting software for your family, see Personal Finance Software .
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