Today, I checked my email junk folder and found a treasure! Everyone I know wants to make more money… and yes, so do I. But I was always taught to look for deals and save on the money you make. The cost of living in the Mississippi Delta is much lower than other places that I have lived, but the economics are just as bad if not worse. Unemployment is high and job opportunities are scarce. I have been blessed with a good job and run a popular blues bar. On the outside, this may sound good; but trust me as with any business owner, I have overhead. And still, I have to maintain my household budget. Again, I happened upon this newsletter in my spam box. The information is sound financial advice and I thought I would share.
The Dollar Stretcher Newsletter is published weekly and yields great common sense approaches to financial independence. Bottom line: Once you control your money, you are on the road to true financial freedom. I know it sounds like a sales pitch, but everything in the Dollar Stretcher is free. The following is an article about household budgeting and determining your daily allowance:
“An Easy Budget Trick, So Simple That Anyone Can Make It Work” by Craig Hinton from Dollar Stretcher Newsletter Volume 14 – Issue 1, January 2011, page 10-12.
Do you hate meticulously tracking every minor expense? Are you tired of being told that to reach your financial goals, you must stop buying fancy coffees or eating out for lunch? Perhaps you’re one of the many people who just don’t like traditional budgeting advice.
Instead of abandoning budgeting all together, how about trying this simple daily strategy? It’ll take you minutes to complete and will give you a very good idea of how much you can comfortably spend while still working towards your financial goals.
First: Open a new spreadsheet on your computer.
Second: Calculate your monthly income. If you get paid every two weeks, multiply your bi-weekly pay by 26 and divide by 12. Type this figure at the top of the page.
Third: Figure out all of your necessary expenses each month. Look at your last few months’ bank statements and credit card bills. What’s on there? Look for things like rent, mortgage payments, cell phone bills, utilities, insurance, etc. Also, take annual expenses like property taxes, car insurance, and so on, and divide them by twelve. Write down these monthly figures, under your income.
For items like groceries or gas, the amount may vary month by month, so write down a good approximation. We’re not aiming for 100% accuracy here, because life’s not like that. But we want a good approximation. You may even have some expenses that aren’t completely necessary, but that you are very determined to do each month. These can be things like charitable donations or retirement fund contributions. Add them in too.
Once you have all of your necessary monthly expenses, total it up. You should now have something like this:
Mr. Example Person
Monthly Income $4000
Payroll deductions $750
Car loan payment 240
Cable TV and Internet 50
Cell Phone 75
Gym Membership 50
Car Insurance 75
Life Insurance 15
Property Insurance 20
Car Maintenance 60
Charitable donations 100
Retirement savings plan 100
Fourth: Subtract your necessary expenses from your income. The difference is what you have left over for saving and discretionary spending, like buying coffee or going to see a movie. Looking at the aptly named Mr. Example Person, we see that he has about $800 left over each month.
Fifth: Take your left over figure and divide by 30. This gives you a daily number. In Mr. Example Person’s case, it’s about $27. If he wants to go out to see a movie or have a cup of coffee, he knows he has $27 with which to work on any given day.
Whatever your daily amount is, remember that number. On an average day, aim to spend less than that number on the little things. Every now and then something big will come along, such as a $300 veterinarian bill, that will greatly exceed your daily number. If you don’t have a bit of a cushion each day, these odd big things will eventually drain your savings over time. But if you ensure you have a decent daily cushion, your savings will steadily grow.
This exercise is also useful if you’re looking to make a major purchase. The payments on that new car are $300 a month? That’s $10 a day subtracted from your number. Are you comfortable with your number being that much smaller and the impact this will have on your life? It is something to consider before making a big financial decision.
The beauty of this daily budgeting technique is that it doesn’t require you to do any fancy bookkeeping or engage in blanket austerity measures. Instead, you have one number to casually remember every time you take out your wallet.
Again, a common sense approach to financial freedom. Understanding what comes in your household and what’s paid out will give you a clear view of your finances and allow you to save money. This is just one of the many articles that feature helpful consumer tips, money-saving ideas, and financial deals. And to think, I’ve missed well over a year of this valuable resource in my junk mail box. Well, now I have my New Year’s Resolution and the weekly support that will keep me on track. I have a lot of reading to do. I hope the Dollar Stretcher Newsletter helps steer your New Year’s Financial Revolution too!
READ, LEARN, APPLY… and SAVE! The Dollar Stretcher