How to Manage Expenses

It can be very difficult to manage expenses in today's society. Gas prices continue to rise, associated with an increase in the cost of buying even groceries. Jobs are harder to come by, with employers gaining the upper hand in salary decisions. Many of us find ourselves running out of money every month and spending all of our paychecks, only to find that we are short in paying our bills. The cable bill ends up getting paid with a credit card, increasing the debt load and making us further away from being able to break even. This article will explore how to manage your expenses, by determining monthly spending, looking where expenditures can be changed, and by budgeting.

Difficulty: Moderate

Instructions

Things You'll Need:

• computer with word processor
• pen and paper to write lists/budgets by hand
• receipts of monthly expenses and bills

How to See What You're Spending Each Month

1. The first step to managing your expenses is to know exactly what you are spending each month. Start by making a list of your set monthly bills, such as cable, electric, insurance and rent or mortgage.

2. Add to this list bills that come up every month, but vary in amount. This would include groceries, gas and entertainment.

3. Determine a monthly average expenditure for each of these types of expenses. For instance, if in February you spent $200 on groceries, March $250, and April $300, your average grocery expense each month is about $250.

4. Now, list items that come up throughout the year that you spend money on. For instance, yearly family vacation, annual real estate taxes on your home, back to school clothing and supplies for the kids, and summer lawn care services.

5. Determine how much you spend on these each year, and divide by twelve to get a monthly cost for each expense. As an example, if you spent $2000 on your family vacation the past two years, divide this by twelve and your monthly vacation expense is about $167.

6. Include in your expenses each month the amount of money you save. If you contribute $200 to a Roth IRA each month, or put away $100 each month in a 529 College Savings Plan for your child, include this.

7. You should now have a list of your average expenses for each month. Come up with a total dollar figure for each month.

How to Determine What You Have Available To Spend Each Month

8. You know now what you spend each month. The second part of the process is to determine how much you can spend each month.

9. Determine your net pay each month after taxes. Look at the net pay on your pay stub. If you have more than one job, come up with a total monthly amount from both jobs.

10. You may have other types of income to add. One such is hobby income. If you have a hobby such as writing that makes you money each month, come up with an average figure per month for what the hobby brings in less expenses for the hobby.

11. Add in child support payments and/or alimony that you receive on a monthly basis.

12. Don't forget to add residual income, such as that you make as royalties from a book you have written or income coming in from people viewing your content each month on Ehow!

13. Come up with a total figure for what you bring home in income each month from all income sources.

How to Budget to Manage Your Expenses

14. You have now determined what you spend each month and what you have available to spend. Which amount is larger? If you have more available than you spend, you have a surplus. If you are short of what you need each month, you have a deficit.

15. If you have a surplus, your monthly budget can basically be the list of monthly expenses you determined in section one. You don't have to go through the next steps. Whatever is left over can be saved or put into investments such as a Roth IRA mutual fund. (You still might want to read on to discover ways to spend less so that you can put more into savings and investments.)

16. If you have a deficit each month, you need a budget to help you manage your expenses. Your budget will have to be only the amount you have in income each month, so you'll have to find ways to get rid of some expenses.

17. Go back to the list you made in Section 1 of all your monthly expenditures. Go through each item, and see where you can trim the fat. For example, your phone bill is $100. If you take off the long distance plan you added to call Aunt Hilda every day and now she's moved local, you might be able to save $15 per month. If you spend $300 on groceries, maybe you could spend $250 if you buy generic brand products instead of name brand. If your vacation cost $2000 last year ($167 per month), maybe this year you could stay in a less expensive hotel and save $300 ($25 per month.)

18. After you have trimmed off excess expenses, see where you are. Did that bring you up to breaking even? If not, you need to find other ways to spend less money. If you have a cell phone and home phone, consider getting rid of the home phone all together. Maybe you will have to go on a local trip and spend only half the money you usually do. Skip Starbucks each morning and make your own coffee.

19. If you're still short, you may have to consider a major lifestyle change. You might have to give up smoking. This could save you up to $100 a month if you're smoking a pack a day or more. Or, you may need to move to a less expensive apartment complex or pay less on your mortgage each month.

20. If you take all these steps and still don't have the money to break even, you may need to get a better paying job or get a second job. You will have to find a way to get to the point where your income meets or exceeds your monthly expenses.

21. Once you come up with a budget that is equal to or less than your income, you have found a way to manage your expenses. Keep this budget handy at all times and use it! This will help you stay on track of your cash flow and keep you from going into debt, as well as allow you to continue to save/ invest money each month.

22. Use this budget when paying your bills each month. For expenses that only come once yearly, you could transfer the money to a savings account to earn interest until you need it.

Tips & Warnings

• When coming up with your monthly budget, always pay yourself first. This means, always add to your savings and investments as a priority when you have the ability to do so.
• Be careful when you are coming up with your expenditures not to forget anything! If you diligently keep receipts for your expenses throughout the year, it will be easy to go back and see where you've spent money and exactly how much. If not, you will have to recall from memory where you spent the money and how much!
• Don't forget small expenditures, like that daily morning visit to Starbucks! You need to know all the money you spend each month.
• Don't forget an expenditure fund for emergencies. You may not have had any emergencies lately, so it's easy to forget this item. But then what happens when you need a new toilet or furnace or have to spend $100 because you locked your keys in your car and you don't have Triple A?

[texthog]

on 2/24/2009 you can also use texthog http://www.texthog.com What is Texthog?Texthog is a super simple service to track your budgets and expenses online. We believe that the easiest way to keep track of what you spend, is to record it in real-time.How does it work?Every user is provided with a unique texthog email address. As transactions are sent to this email address, they are parsed by texthog fairies and recorded in your texthog account.How do I send a text message to an email address?The simple answer is to give it a try. If you're able to find the @ key it should work. Most carriers support some method of sending an email via text message.Am I limited to only using text messages?No. Texthog was designed with an open method in mind for posting transactions to your account. In lue of sms, you can also post transactions via email, or by logging into your account and entering it manually.Which carr

[kllmomof2]

on 5/28/2008 Excellent info,thanks