While a Financial Snapshot is a useful resource for see the big picture, the Budget gets down to the nitty-gritty of your financial health in a proactive, usable way. From tracking and listing your expenses, you get a good idea of what your spending is in different categories, such as groceries, gasoline and gifts. But how does knowing this information allow you to reign in your spending, pay off debt, and get you to start saving at a higher level?
That is where budgeting comes in. Most people think of the financial overview as a “Budget.” Many even wince when they hear the term, a it reminds them of financial failures and rigid rules. I don't see it that way. While the word “budget” is used as a noun, I prefer to use it as a verb, as in “to plan an allotment of (funds, time, etc.)” according to my Webster's Universal College Dictionary.
Is this just a question of semantics? I don't think so. To me, it is empowering to think of “budget” as an action word, rather than something that just describes my financial situation.
It took me months of careful tracking to get an accurate financial snapshot, since we have had so many life changes. My husband's new venture as a contractor provides very unpredictable income, our move from an apartment to an older home has changed all of our housing and utility costs, insurance has changed dramatically, and we now own different vehicles.
This is the first time that I can say, with some degree of reliability, what our spending will average in each category. How can I use that knowledge? My overall goals are to pay off the debt we accrued in purchasing and renovating our home, rebuild our Emergency Fund, and start saving for further needed renovation to the home. Looking at our average income per month, and our total fixed and flexible expenses, I can see that we need to reduce our expenses in order to achieve those goals. I can even come up with a figure of how much I want to reduce expenses in a month to work towards that goal.
Then, when I drill down to a particular category, say, groceries, I can determine that I need to reduce it by X dollars as part of this plan. This objective becomes a challenge to me. I began to brainstorm ways to reduce grocery costs, such as a monthly meal plan, making a price book for my local stores, and stockpiling groceries when they are at their lowest costs.
Here's an example: My husband spends money on getting drinks and snacks at convenience stores, so I am trying to replace that expense by keeping a stock of beverages and snack foods for him to take with him each day. When I get these items in a larger quantity, and at their lowest price points, it offers a tremendous saving potential. Just this week, I was able to purchase packs of 6 bottles of soda he likes at less than the convenience store price of 2 bottles. Over the course of a month, this really adds up.
There are many ways to save more on groceries, as well as other common spending categories, such as gifts, gas and electric. When you see your budget as a helpful tool instead of a dreaded chore, you will be able to seize these opportunities and put new strategies into play to reach your goals.
First appeared on Letters from Sunnybrook
About the Author: Ever since she was a child, Rebecca has been fascinated by numbers and how to work with money. She started her first ‘envelope system' using plastic containers and change found on the ground. As a teen, she asked for subscriptions to financial reports instead of fashion magazines. Today, she likes to share ideas on saving money, budgeting, making healthy meals, pet care and parenting, and living a joyfully frugal lifestyle on her Blog www.LettersFromSunnybrook.com
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