You work hard for your money. Here’s how to keep more of it.
As I write this, the economy is in really bad shape and there isn’t a regular person around who’s not buying less because of it. But I’m also thinking that, even when the economy is fine, and American cheese singles are not almost $7 a package, so many of us – myself included – still struggle buying groceries, paying down debt, and having any money at all left over for some fun.
My point is that especially now, but also always, having a household budget in place is crucial.
“Budget” sounds like “diet” to me
The word “budget” always sounds like “diet” to me. And who likes diets? Diets are restrictive. Difficult to adhere to. Punishing even.
But diets have their benefits. And budgets do too. When adhered to even just a bit, both pay dividends. Your clothes are a little more comfortable or your blood pressure drops a few points. You’re able to take the kids to the movies or to spring for a manicure.
If you want something, you have to work for it. Well, I want to help you keep more of your hard earned money in your pocket and I’d like to do the same for myself so let’s get into this budget business now. Because honestly, I need to do something about my nails.
How to set up a budget
First, determine how much money you bring in after taxes. This is easy enough to do if you receive a regular paycheck. For the sake of this exercise, let’s pretend you bring home $2,000 a month. Let’s also pretend you bring home another $500 from a side hustle or two. That’s $2,500 a month.
Next, pick a budgeting method. From what I’ve read about the 50/30/20 method, it sounds like the method for me. My mother, on the other hand, has always used the envelope system.
With the 50/30/20 method, you allocate up to 50% of your post-tax income for needs, 30% of your income for things you and your family want, and 20% gets put into savings and is also used to pay down debts.
With the envelope system, you get paid, cash your check, and place cash in envelopes you’ve marked “Mortgage,” “Utilities,” “Cell Phone,” etc. and then, when enough cash has accrued to pay a particular bill, you deposit the cash, write a check, and pay the bill. As I said, my mom swore by this system and I know people who still use it. But it means carrying a lot of cash and having a lot of cash in the house. Those things worry me.
Having said that, for the sake of this post, we’re going to work with the 50/30/20 method.
So, what are your needs?
As I mentioned, with the 50/30/20 method, you allocate up to 50% of your post-tax income for needs. Needs are essentials, the things you absolutely must have for living and typically include:
- Rent or mortgage.
- Car payment.
- Car insurance.
- Health insurance.
- Child care and/or any other expenses incurred so you can work.
Since we’re pretending you clear $2,500 a month, that’s $1,250 you can spend on needs. Start by writing down each of those categories and assigning a dollar amount to how much you spend on each every month. And when it comes to car and mortgage payments, budget for making just the minimum payment allowed. Any more than that should go in the 20%/paying down debts category and for the purposes of getting started, it’s best to work with the minimum payment you can make.
What are the things you want?
As I mentioned, with the 50/30/20 method, you allocate up to 30% of your income for things you and your family want. Again, since we’re pretending you clear $2,500 a month, that’s $750 to put toward wants.
Remember, needs are those things that are essential. Wants are things like:
- Take a vacation
- Go to the movies
- Eat dinner out
- Get a monthly manicure
Deciding what’s a “want” and what’s a “need” can be tough. Is a manicure a want? Or maybe it’s a need because you know you have to look a certain way at work. Give this part of your budget serious thought as you develop it. If something looks like a “want” but you know in your stomach it’s a “need,” put it in that category.
Now, let’s save some of your income and use some to pay down debt
With the 50/30/20 method, you allocate up to 20% of your post-tax income and put it toward savings – for retirement, out-of-the-blue expenses, etc. – and paying down debts. With $2,500 in post-tax income, that means you have $500 for this category. I find it easiest to split the 20%, and put 10% ($250) in a savings account, and the other 10% ($250) in a checking account specifically for paying down credit card, student loan, and other debts.
Budgets… and reality
In the scenario we’ve just gone over, you have $1,250 for monthly needs, $750 for monthly wants, and $500 for monthly savings and to put toward paying down debt. The reality may be though that you need more than $1,250 for your monthly needs and in that case, you need to “borrow” from or, more accurately, not put as much into the other categories. This is normal. Let me say it again: this is normal. This is most likely your first time putting a budget together which means it’s the first reality check about where your money is going that you’ve had. We’ve all been there. Breathe. Now that you see it in black and white, you can do something about it. And you will. And things will improve.
Tools for tracking and managing your budget
Now that you understand how, by using the 50/30/20 method, your post-tax income should be allocated, you need some way of managing that information and charting your progress. You can keep it all in a notebook or create a spreadsheet in Excel or Google Sheets. There are also, as you can imagine, lots of apps dedicated to helping you organize and manage your budget. Personal Capital, Mint, and Goodbudget are three with very good reviews plus they’re FREE. I can’t see the sense in working hard to keep more of my money and paying for an app, but that’s just me. Explore them all and read the reviews then pick the one that works for your needs.
Final thoughts about budgets
Your budget is a tool, and a flexible tool at that, to help you. As your circumstances and priorities change, revisit your budget and make the necessary adjustments. It’s a good idea to review your budget at least once a quarter to see how you’re doing and to pat yourself on the back for making progress. To go back to the diet reference I made earlier, it’s like feeling your clothes getting loose, or having your doctor say your blood pressure is down. It makes you feel good, like the effort is worth it, and gives you the motivation to stay the path.
The next section provides tips on more ways to keep more of your money. Try one. Try five. And put the money you save toward your needs, wants, and savings. It all adds up to improving your financial position.
More ways to keep more of your money
Set up automatic transfers
Spend a few minutes on your computer setting up a monthly automatic transfer from your checking account to your savings account and wala! You’re free from thinking about it and worrying if you did or didn’t take it care of it this month (or any month). In addition to alleviating that money worry, you’ll have the pleasure of watching your savings grow as if by magic until one day you discover that vacation you’ve been saving for is ready to be taken.
Keep the change
And I mean keep it. Every day. Empty your pockets and pocketbook of your change at the end of the day and put it in a jar. Do this for 30 days then count it up and deposit it into your savings account. This is by no means a get rich quick scheme, but you’d be amazed at the chunks of cash you can save this way. In fact, one time a long while ago, we needed a new sofa. With a mortgage and two kids, a new sofa wasn’t happening any time soon, I assure you. So I convinced my husband that we should save our change. Every day we put all our coins in a huge planter we named Bertha. (Why Bertha? I honestly can’t recall.) After six months we counted it up and can you believe it – we’d saved almost $2,400. Guess who got a new sofa?
Do a home energy audit
Did you know that your coffee maker, toaster, phone charger and other devices suck up energy even when you’re not using them? They do – and they can account for as much as 20% of your monthly electric bill. Take a walk around the house and unplug these items and others you’re bound to discover. You can also make your home more energy efficient by replacing air filters every 3-6 months, and making sure your windows, vents, and even the space around electrical outlets are properly insulated. This prevents your A/C in the summer and heat in the winter from being wasted.
According to the Alliance to Save Energy, the average U.S. household spends $5,550 a year on energy. Purchasing energy-efficient appliances, making certain home improvements and taking actions – like those mentioned above – every day can save hundreds of dollars.
To see how you’re doing, ask your utility company to provide you a year over year expenditures statement so you can see if any of your bills are trending upward and taking steps to stop it.
Cancel those subscriptions
Cable television. Magazines. Gym memberships. Weight loss apps. These and others like them are subscriptions so many of us forget about, but still get charged for. Set aside time to review your credit card statements and checking account statements and you might be amazed at the number of items you thought you cancelled but are still paying for. Don’t have time to do it yourself? Try Truebill. The site searches forgotten subscriptions on your behalf which is great, but just be aware that for every dollar you save by using the service, Truebill takes 40% as what it calls a “savings fee.” So if they save you $500 annually on a particular bill, they’ll charge you $200. And while you save annually, Truebill takes that $200 fee immediately.
Lower your auto insurance payment
You compare the prices of electronics and clothes before you buy them, so why not compare auto insurance quotes? There are websites like credit report company Experian, that make comparing quotes a snap. Experian provides multiple auto insurance quotes in minutes. You can see all the best rates side-by-side and quite possibly save yourself more than $900 this year. Of course you can also do it the old fashioned way – by calling around. One of my best friends made a few phone calls and replaced her $300 a month plan with one for $55. In less than 20-minutes, she saved $2,940 a year.
Bring a list to the supermarket
Sure – you should join your supermarket’s loyalty program to save more on your purchases and if you hit Target or Walmart for groceries, absolutely get their app for additional deals. But the most important thing you can do to save money on groceries is to bring a shopping list of exactly what you need to buy. It takes just a few minutes to look in the refrigerator and freezer, pantry, and laundry room to determine what you absolutely need to purchase and write it down. It’s worth the effort to prevent buying things you don’t need or giving in to impulse purchases.
Cut out dining out
Or at least cut down the number of times in a month you dine out. I know how tough this is. Everyone is busy and exhausted. Cooking is the last thing you want to do after working all day. It’s just so much easier to say “let’s eat out tonight!” But I’ll tell you, you can save some real money by cutting restaurant meals out – or at least down. And when you do dine out, consider ordering appetizers only or sharing an entrée with your dinner companion. To save even more, skip the drinks and the dessert. (You can always have those at home!)
Embrace your local library
Libraries today offer so much more than books. They are a treasure trove of digital options including movies, foreign language classes, audiobooks, e-books, music, and more – for adults and children. And you can access all these items – including books! – free, simply by presenting your library card. Many libraries now allow members to “check out” passes for local attractions. Libraries in Atlanta provide members with passes to the local zoo, the aquarium, and the science center. Call your library and ask if they offer free passes to specific events and activities.
Switch – or ditch – your cell phone carrier
If you’ve never considered looking into free cellular service, this is the perfect time. Life Wireless offers government subsidized cellular services through the Affordable Connectivity Program to qualifying individuals and families. And, if you’re unemployed or participate in a government benefit program such as SNAP, Medicaid, Federal Public Housing Assistance, SSI, or WIC, you already qualify for this Federally funded free cellular service. As a participant, you receive the following, free, each month: Unlimited talk, text and data*, and a free smartphone or you can bring your own.
Even if you’re paying just $20 a month for cell service, wouldn’t you rather have that $240 to spend on the needs highlighted in your budget or to put toward paying down debts? It takes just a few minutes to complete the application. Do so now, and you could be cutting your monthly cell phone bill to nothing in no time.
Plus, if you’re approved for Life Wireless/Lifeline Assistance Program and sign up for the Affordable Connectivity Program (ACP), you get two sources of free talk, text, and unlimited data that you can split between two phones. That means free cell service for you and free cell service for someone you love. If your child has been asking for a cell phone, this is a terrific opportunity to provide him or her with talk, text, unlimited data and the ability to stay in touch with you!
Of course you don’t have to split the service between two phones, you can keep it all on one. But it’s a wonderful option if your spouse, child or relative needs a phone – and who doesn’t? – but has been unable to get one due to the expense.
Whichever option you choose – to keep the data on one phone or split it between two – Life Wireless will make sure you receive the free talk, text, and unlimited data to help you stay connected.
Option 1: Combine Your Data
Activate Lifeline and ACP on the same device and receive unlimited talk, text, and data, plus 5GB of mobile hotspot.
Option 2: Split Your Data
Split your data between two phones or supported devices and you’ll have one device with ACP’s free talk, text, and 6GB of data and a second device with Lifeline’s talk, text, and 4.5GB of data (6GB of data in California).
Limit your online shopping
There’s only one sure fire way to limit online shopping and buying things you probably don’t need. And that’s to stop saving your billing information on your favorite sites. (If you’ve already done it, delete it.) That fact that you have to input your shipping address and credit card information every. single. time. you want to buy something from Amazon or Target or wherever, is enough to make you say, “the heck with it!” Really. The extra work is an amazing deterrent.
Keep more of your hard-earned money with Life Wireless. Start now!