Set Up A Budget

Question from a reader:

Hi, I'm fairly new to this frugal living stuff and I feel overwhelmed at the information that is out there.  We just came to a place where we need to start cutting back and saving money.  Do you have a tip for us that are first starting out because I'm not sure where to start.  Thank you in advance.

Amanda


I'm sure it is overwhelming!  The first thing I did was sit down and set up a budget.  You can't get ahead if you don't know where your money is going.  Pull up your account online or use your mailed bank statements.  Get a sheet of paper.  On one column write down everything that comes in each month (salary, pay etc.)  Add it all up and circle it.  On the other side write down everything that you HAVE to pay each month like mortgage, rent, electric bill, car loans, credit card minimums etc.  Circle it.

Subtract your bills from your income.  This is your working money.  This is where you set up your monthly grocery money, entertainment and so forth.  Figure out how much you spend on groceries each month.  You can do this by looking at the past month's bank statements and make an estimate.  And to be honest if you don't have much room in this area you don't really need an entertainment allotment.  You may have to wait on fun until you can afford it.

Next comes paying extra on credit cards.  What's left over can be put towards paying off your debt.  It is always best to pay it off each month, but a lot of times we can't do that.  That crazy thing called life gets in the way.  Putting the extra money towards credit cards saves you on interest.

After you've set up your budget this is where the work begins.  Try each month to use less than your allotment.  Like instead of spending $400 on groceries try to only spend $350.  That money saved can be put to other things like paying off credit cards.  Look for sales and learn to do it yourself.   A lot of times we pay extra for convenience.  Cut out the junk food and extra stuff that isn't necessary.  Like, I used to buy 5 packs of Oreos a month.  It's not healthy and I don't really consider it "real food."  It's just extra.  And at $2.75 a pop I saved $13.75 by choosing not to buy them anymore.  I put that money saved to buying fruits.  I'd much rather my kids eat grapes and bananas than a ton of oreos.  You'll get better at spotting the sales and knowing the deals as each month passes.  Before you know it you'll be a pro at saving money and you'll cut your grocery bill in half at least.

This is how I did it.  It may not be the best or proper way to do it, but it works great for us.  I hope it helps!