– by Esther Harvey, Instep Accounting –
A budget is a tool/plan to guide and control spending through the holiday season and beyond. Basically it is a list of what you need and what you want in say, a month, compared to the amount of income you actually receive in the same period.
How to create a budget for a month:
On paper create three columns. In column one, list everything you have to spend money on as well as what you would like to spend. If you know how much each costs, put the value in column two, otherwise guess the value as closely as possible. Include all your expected household expenses for the next month including food, utilities, cell phones etc. You will have a long list but you will have a good idea of how much you need by adding up column two. If the value in column two is greater than your expected income, there are some choices:
1. Decide what are necessities in your list and take out some of
the”nice to have” items.
2. Reduce the value of column two by buying less of an item
3. Lesser-known brands can be cheaper for the same item
4. Organics are nice to have, but read the labels
for comparative, cheaper options.
If you still have limited funds for holiday spending and your list is all important, thinking about how you normally spend money can highlight areas where you can save, for instance: An everyday coffee $3; your daily donut, danish or muffin $1; lunch $6. Costs of dining out, take-outs and ready meals all add up. Other areas of saving could be the everyday glass of wine or beer (perish the thought).
None of the above tricks are set in stone, but 30 days of one less coffee = $90, and 25 days of making a bagged lunch at home could be $125 saved; if two people in the house take the same approach the saving on just these two things could be $430 in a month! One less restaurant or take-out meal could add to that total.
Once you are happy with your list, record your actual spending for each item as you go in column three. When you compare columns two and three you will see if you are overspending or not; you are in control.
If you buy something that isn’t in your plan, try and substitute it for something in the list that may not be as important. Remember that the budget is a guide: it is a flexible tool so if you overspend in one area you will need to underspend in another. By planning in advance of the holiday season and sticking to your budget, you can avoid the trap of impulse buying and save your credit card post-holiday season.
For more information visit www.instepaccounting.com.
