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Top 10 Home Budgeting Tips

budgeting.JPGAre you trying to run a household on a limited income? Most people are. Whether you are married, single, childless or raising a family, a part-time student or working three jobs, chances are there’s too much month left at the end of the money.

Here are some simple ways you can make the most of what you make—and maybe even have a little left over before your next payday.

1) Know Your “Nut.” In business, the “nut” is the amount you must pay each month to meet fixed expenses. If you have not done so already, take a month to note and record what you spend on such necessities as rent/mortgage, gas, electricity, insurance, food, telephone service, savings, etc. If your “nut” already exceeds your monthly income (after taxes), you have a problem, one that requires immediate and perhaps even dramatic action, such as moving to a less-expensive neighborhood. However, if you still have money left after paying your “nut,” you can consider other cost-cutting strategies to leave you with a larger amount of “discretionary” income, money you can spend on yourself and your family.

2) “Cash” is King. These days, it’s all too easy to whip out a credit card when making even small purchases. Not only does this habit lead to painful (and often unnecessary) interest charges, it makes it too easy to lose track of how much you’re actually spending. (Which is kind of the idea, as far as the credit card companies are concerned.) When you pay cash, you not only save on interest, but you’re less likely to buy unnecessary or “impulse” items.

3) Dine In. Eating out is easy, convenient, fun—and a potential budget-buster. Even seemingly “low-cost” meals like breakfast or lunch can cost 200% to 300% more at a restaurant than if prepared at home. Home-prepared meals also tend to be more nutritious, lacking the fat, salt and sugar (not to mention over-sized portions) most restaurants use to make their food appealing. And speaking of restaurants…

4) Share and Share Alike. When you do go to a restaurant—Hey, a person has to enjoy life, right?—go to those known for large portions…and then split the entrée with your dining companion. You’ll not only save money, but calories. Oh, and don’t be embarrassed about splitting a meal. A lot of people do it.

5) Clip Those Coupons. Newspapers may be dying, but there are still plenty of coupons to be found both in local publications, in mailers and even online. Use them whenever possible to save on products and services you normally buy. Let me repeat that: On products and services you normally buy. Although merchants would like nothing better than for you to buy a new item because you save 10% on your purchase, the real savings only come when you reduce your outlay, not increase your consumption.

6) Look for Less Costly Entertainment Alternatives. Today, we’re surrounded by a feast of entertainment options. From cable/satellite TV to video games to DVDs to movies to the Internet, there’s virtually no limit to the ways we can spend our leisure time. Or our money. To reduce monthly expenses, limit your choices to those that deliver the best “bang for the buck,” and then look for the most cost-efficient ways to enjoy them. For example, restrict yourself to movie matinees instead of evening shows, or just get basic cable instead of a package of premium channels.

7) Buy a “Pay-as-You-Go” Cell Phone. Cell phones are everywhere. In fact, in the 21st century, it’s difficult to get along without one. However, long-term contracts not only force you to spend a fixed amount every month, they also encourage over-use by making the minutes you use virtually “invisible” on a daily basis. A more cost-conscious alternative is a basic, no-frills phone with a “pay-as-you-go” payment plan in which you only pay for the minutes you actually use. In this same vein, if you’re using a cell phone, there’s probably no reason to have a home land-line as well. Let one phone play double duty…and pay less.

8) Put Your Kids on an Allowance. If you have children who are old enough to be responsible with money, give them a weekly allowance for “luxury” items like fast food, movies, music, etc., rather than just paying for these items “as needed.” Not only will you be able to better control the size of these outlays, but you’ll help instill good budgeting habits in the coming generation.

9) Don’t be a Slave to Fashion. Clothing styles change rapidly so you’ll feel pressured to replace your wardrobe long before your clothes actually “wear out.” To avoid this trap, buy your primary wardrobe at off-price or outlet stores, and choose “classic” styles not likely to look “old” six months from now. A word of caution: Don’t buy cheap. A cheap piece of clothing can become faded or wrinkled after just a few washings, while a better-made item can last years.

10) Protect Yourself. Smart budgeting involves not just controlling present outlays, but making sure you don’t get slammed by gigantic bills in the future. This means purchasing reasonable amounts of car insurance, health insurance, homeowner’s insurance and even disability insurance—and finding room in your budget to pay for them. A little sacrifice today can protect you against potential bankruptcy tomorrow.

Domestic budgeting takes awareness, discipline and, yes, some sacrifice. But the long-term rewards can be substantial, leading to a more stable, more sustainable and, yes, happier household.

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