How to Make a Budget
In Part 1 we organized our expenses into about 10 categories such as utilities, savings, donations, and transportation. Now we will take each of those categories and put into one of three groups. I like to organize my expenses into these three groups: fixed, negotiable, and variable.
These groups help me see which of our expenses we can be saving money on and how. For instance, fixed expenses like loan payments and rent are relatively difficult to change. Of course even these are not really fixed. You could pay extra on your loans or move to a more affordable house.
The negotiable category includes monthly payments like house and car insurance, internet, and cable. You could save money by calling your provider and negotiating a lower rate or by shopping around with different companies.
Variable expenses are categories like groceries and utilities that vary from month to month. We have the greatest amount of control over our budget in these areas. Though it may be a challenge, we can almost always manage to save a few dollars in each of these categories.
Make a Budget to Save Money
This is a great time to set some financial goals for the year. Your budget shouldn’t just reflect what you spend now or what you can afford to spend. Instead, you can set targets of what you would like to change about your spending habits. Perhaps you want to add a monthly charitable donation or a contribution to your savings account. Maybe you want to reduce your clothing spending or your utilities.
I imagine most of us are going through this process of making a budget because we want to reduce our spending. There are a couple of ways to go about doing this. It maybe a good starting point to reduce your spending on variable expenses by 10 percent across the board. Alternately, you could pick two or three goals from the 37 Easy Ways to Save Money list and incorporate those into your budget.
When making your budget, be sure to account for expenditures that occur only once a year or even less often. These may include renewal of your drivers license or car registration or annual memberships. You can use your itemized spending history from Part 1 to estimate your monthly expenses, but consider how these may vary from month to month. For instance, utility bills may be higher depending on the season.