Welcome to the world of "Budgeting" ; a very important, yet widely neglected and misunderstood topic, in most households.
I am involved in several home-based businesses, but the most important of these by far, is managing my Monthly Household Budget. Notice that I used the word "business" to describe managing my budget. Unlike most people, I treat my monthly expenditures as a business-always looking to improve the services that I pay for by finding better deals, and reducing resultant costs. I always aim to get the best bang for my buck through increased services at cheaper costs. When I find a particular budget item that can save me $ 100 per month, I do not only look at this as a savings, but I treat it as if I just received a $ 100 per month raise, which translates into a $ 1,200 per year salary increase (assuming that it is recurring monthly). Yes, by being diligent and resourceful, I just gave myself a $ 1,200 raise for the year, which, by the way, is cumulative in effect, year-over-year. Wow! Now imagine if I can replicate this feat for multiple items in my budget, again and again. That is going to be some kind of hefty raise that I am giving myself. You see, by treating my monthly budget as a business, I provide myself with a means of increasing my disposable income and savings. I do not need a boss to give me a raise; through diligence and resourcefulness, I can give myself a raise, again and again, over and over, year over year. The long-term, cumulative effects of doing this can be quite staggering, to say the least, and one's overall net worth will increase substantially over the years, by putting this "business practice" in place.
I am an extremely compulsive and diligent budget person. Regardless of how large or small a household expenditure is, I record it in a tracking spreadsheet. I think my wife thought that she had married some kind of compulsive lunatic, when I implemented this system in my household. But, as time moved on, she recognized and understood the value of the budgeting system that I put into place in our household. Moreover, I have taught my 3 children the value of money and budgeting, and have attempted to interject these principles into their lives as much as possible. No doubt, that as adults, they will be much better off because of this.
I know exactly how much money I am spending in each category of expenditure on a daily, weekly, monthly, and yearly basis. I can honestly say that I have no friends, family, neighbors, or acquaintances that are as diligent and passionate about budgeting as I am. As a matter of fact, most people do not truly understand the art of budgeting. Sure they use the words "not in my budget" in conversation; but few, if any, actually understand what their budget looks like, how much it costs them to live each and every month, and how much money is going out-the-door in regard to their bills and expenditures for goods and services that they have procured. Many people I know constantly waste their money on frivolous spending, and neglect basic budgeting techniques and practices. Some of these areas of budgeting can individually save them hundreds of dollars per month, if implemented.
I have broken my budgeting techniques down into a series of categories listed here. Each category should have one or more specific Strategy items associated with it, that you will need to come up with. Some categories should have more budget strategies listed for it than others. Some budget strategy savings ideas will be relatively small in nature, but please do not discount these. After all, these little items do add up, and the net effect of the sum of all applied budget savings strategies, is what counts. That said, here are my budget categories that require addressing:
- Lawn / Garden
- Weddings and Gifts
- Banking / Finance / Bill Paying
- Medical / Dental
- Other Insurance
- Cost of Living
Next, I want you to develop a personalized Budget Action Plan while addressing each of these categories. I want you to buy a notepad (or alternatively, feel free to use a word or text editor on your computer, smart phone, or e-reader to accomplish the same purpose), and create 2 columns:
- Category: Strategy
- Budget Action
Traverse each category, one-by-one, and start listing individual Budget Strategies for each category above. Concentrate very hard on how a designated category and budget strategy item can seriously be applied to your household budget situation. Keep in mind that some Budget Strategies may seem overly simplistic or obvious. If relevant to you (and most will be), write down the budget category and budget strategy item, and one or more budget actions that you need to implement to put the category and strategy into place, keeping your personal situation in mind. Continue to do this for every Budget Strategy, in every Budget Category. Again, make every attempt to apply each category and strategy to your situation. Do not ever dismiss a particular category and strategy item because it only saves you $ 10 per month-these small items add up fast, and the overall aggregate monthly savings, when all is tallied up, will simply amaze you! When you have completed your Budget Action Plan, review it, and start implementing your Budget Actions, one-by-one, on a monthly, or need-be basis. By the way, it would not hurt if you went through your Budget Plan multiple times. This may easily facilitate new ideas and additional Budget Actions that can be implemented in your Budget Action Plan.
If you are honest with yourself, extremely diligent about implementing these budget actions, and have the necessary discipline to stick with it, there is no reason why you can not reduce your monthly household budget by 20% (or more) in a given year. This should be an on going process, year-after-year, as you continuously review your expenses annually, to obtain that raise that you deserve!