- It is often shocking that most people don't know how much money they spend in a given period of time. Money supports our lifestyles and spending it is much easier than earning it. Examining your spending for even one week will help you to understand where your money is going. To understand the big picture, you should be able to examine or estimate your montly spending including all bills and purchases. You can also do this by assessing your previous month's bank statement. This will give you a starting point for creating a budget.
- Once you understand what your expenses are, now the real question is - do you have enough resources to cover them? Perform some simple math - add up your monthly expenses and subtract them from your total monthly earnings. If you get a positive number, you're on the right track. How much of a positive number you're left with is the next question to ask. If an unexpected expense arose, is that number enough to cover it? If you get a negative number, there are some definite adjustments to be made. Start by prioritizing - that $4 cup of coffee everyday before work translates to $80 per month. A pound of coffee that can be made at home is $10. Examine the expenses that aren't absolutely necessary. If you can't eliminate them, try to reduce the frequency.
- It can be difficult to make decisions about where to eliminate things and activities that are a part of your life. Seek outside help. A financial counselor will have a fresh perspective and can provide objective recommendations on where adjustments can be made. To avoid an additional expense, check with your Human Resources Department to see if there is a financial planning resource included in your Employee Assistance Program (EAP). You can also contact a financial planning organization such as Consumer Credit Counseling Service who offers many no-cost or low-cost budgeting services (See References).
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