How to Help an Excessive Spender's Budget
Excessive spending is a common problem in American Households. According to CNN Money, many households that earn less than $50,000 per year spend more money than they bring home. You can remove yourself from this statistic with a bit of work and effort. Excessive spending can be controlled by judiciously monitoring where and how you spend your hard-earned money, and taking steps to conciously limit and control that spending. Controlling your spending doesn't mean you must do without. It simply means that you plan the most important expenditures and take steps to ensure you're sticking to that plan.
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Instructions
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Write down all your expenditures -- regardless of how small they may be -- for a minimum of one month. The first step to making a spending plan is knowing where your money currently goes.
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Calculate your monthly take home income. Since most bills are paid on a monthly basis, working with monthly income makes it easier to create and execute a solid spending plan. It's important to work with your take home pay when creating a budget, because this is the amount of money you actually have available to spend on bills and purchases.
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Create a list of fixed expenses. Fixed expenses are bills that remain the same from one payment period to the next. Your rent or mortgage payment for example, and health or car insurance bills are often fixed expenses.
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Add all of your fixed expenses together and subtract the total from your monthly income. Note the balance of funds that remains.
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Create a list of variable expenses such as groceries, utility bills, toiletries and home supplies, or transportation. Variable expenses are costs that you have regularly that vary from one period of time to another. Use previous sales receipts and bills to calculate an average monthly amount for each.
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Add the variable expenses together and subtract that total from the remaining total income.
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Divide remaining funds into discretionary spending areas. If there is income remaining after you subtract the fixed and variable expenses, then you can allocate the remaining funds to other areas. You might choose to set some aside for dining and entertainment, for example, an upcoming vacation, or just to use as general mad money. Write down an estimated amount for each area you've selected. Make sure your discretionary spending totals don't exceed the remaining amount of income you wrote down previously.
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Mark each of your future expenditures with a category that coresponds to an item on your spending list. If you pay the electric bill for example, then you'd mark that payment as a variable expense. Each time you spend money and mark it with a category, subtract the amount you spent from the total listed for that category. This provides you with a quick running balance of each category. When you have zero dollars remaining in your dining out category, for example, you know that you can't dine out until the next budgeting period starts.
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Tips & Warnings
If you have difficulty with self control even after creating your spending plan, try forcing yourself to stick within the limits you set by using an envelope system. If you allocated $100 for dining out each month, for example, withdraw physical cash from your bank account at the beginning of the month and put it in a marked envelope. Each time you go out to eat, spend only the money from that envelope. When the envelope is empty, don't spend more until the next budgeting period starts.
References
- CNNMoney: Making a Budget
- Kiplinger: Build Your Budget
- The Total Money Makeover: A Proven Plan for Financial Fitness; Dave Ramsey; 2007
Resources
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