Budgeting 101 – Frequently Asked Questions

In a previous article, I outlined the basics of budgeting. Hopefully, if you hadn't had a budget set already, you sat down and took care of organizing a budget for your household. If you haven't got one in place right now, I would suggest you stop reading now and take some time to set one up. Why is it important?

-         If you're young, you need to know if you're over-spending or have money to save.

-         If you're older, you'll need to know you much you live on now and want to live on in the future in order to do an accurate retirement projection. You may end up running out of money very soon, or be able to live on more than you thought.

 As a reminder, here is the mock budget that we used in the article:

 As mentioned in the title, this article will be addressing the commonly asked questions - if yours doesn't get answered, please email them to us so we can address them. 

 What do I do if I have extra money at the end of the month?

There are only 3 things you can do with money: "Give It, Save It or Spend It." You'll notice how our budget does not include any religious giving or donating to charity. Maybe your budget will include giving to your place of worship or favorite charity, and if you have extra money, maybe you'll Give that to them as well. If you decide to Save It, then you have a couple of choices. 

Firstly, make sure your Emergency Fund is fully funded. This should be between 3-6 months of living expenses (3 months if married and both partners are working, 6 months if single or only one partner is working). Next, move to college savings for kids. If you're currently saving and you want to contribute more to those funds, go ahead and Save It there. If you're not currently saving, no is an ideal time to start.

Then move to retirement savings. If you are not contributing 15% of your take-home/net pay to retirement accounts, then Save It there. Then choose if you want to save for "big-ticket" items (new TV, vacation, new car, etc.) and contribute your extra money to a savings account for those items. Next, pay down the principal on your mortgage or invest the money into a brokerage account. More extra money....? Wow! I guess now is the time where you start to Spend It - go shopping :) 

What if don't have enough money to make it through the month?

This is a less pleasant question to answer than the one above, and in current times, a more common one.  First, establish how short you are at the end of the month (on paper). Let's say it is $1,000. Go through your budget and cut any fat you can find.

Using our example budget, if you're short on living expenses, then stop saving for retirement.

-         Look at the grocery bill - can you cut that down? Use coupons, buy in bulk, and cook from scratch a lot more than you usually do.

-         Cut the gym membership - run the streets and lift bags of salt.

-         Cut the XM radio - listen to regular radio.

-         Don't buy as many clothes.

-         Have a "stay-cation" and cut the vacation budget down.

-         Announce to the family, that Christmas will be a family time this year and there will not be an abundance of gifts. That will be a hard announcement, but everyone has enough stuff, don't we?!

-         Trim the entertainment budget - go out less.

Hopefully this will give you the extra money you need to make it through the month and survive. If not, look for an extra job, have a garage sale, start a home business (dog-walking, grass cutting, baby sitting, etc.) ANYTHING TO GET EXTRA MONEY.

If not having enough money at the end of the month is a common thing, you'll either need to permanently adjust your lifestyle or earn more money. Start thinking about a job and pay you'd like to have in the not-so distant future and take the steps necessary (class, internships, etc.) to get there