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A Budget That Really Works by Galia Gichon   Doesn’t it sound refreshing? I often compare keeping a budget to dieting.  There are so many diets out there (Atkins, cabbage soup, South Beach) as many different budgets.  After more than 13 years experience, here is one that is easy to follow and can work wonders for your cash flow.  It can also be called “Back to Basics” or starting over with a clean slate every week.  Many of us have gotten used to paying with our credit cards, and we really don’t know where our cash goes.  As a result, we don’t have much left over at the end of the month.  Sound familiar?    Try living on a weekly cash budget for the next two months.  Cash ONLY.  The key to making it work is to come up with a set amount and sticking to it for the week – NO MATTER WHAT!  For example: you came up with $250 spending money for the week.  If you stick to it, it will change the way you look at “budgets.” Plus you will have more money left over at the end of the month and be motivated to do more with your money – like go on vacation! Here’s how to get started:       First, come up with your monthly income, after taxes.  If you are self-employed, estimate your average monthly income.  Include any other income you might receive (i.e. child support, investment income).  Then come up with your fixed expenses.  These are the expenses you have to pay – no matter what!  These include: Rent or Mortgage, Home Equity Loans, Car Payments, Insurance Premiums: Auto, Health, Home, Life/Long Term Care,    Other Loans (student loan, credit card, fixed loans), Taxes not withheld from pay, Utilities, Water and Sewer, Telephone: Local, Long Distance and Mobile, Transportation: Public/Transit, Gas, Taxis, Repairs, Childcare, Medical/Dental,  Cable/ Internet Access and anything else that is a monthly expense that you have to pay every month.  Now what is left?  For example, your monthly income is $5,000, your fixed expenses are $3,000 and you are left with $2,000 a month.    Here comes the fun part because this is where you can see results for your hard-earned money.  Think about your goals (vacation, debt repayment, buying a home, children’s college education). This is where that money comes in.  You have to put it away before you spend it on flexible items.  Write down what you think you would realistically like to save.  You can always change it later on. For our example, we will assume $500 a month.  You then subtract that from the $2,000 that is left.  You now have $1,500 and divide it by 4 = $375.  This amount is now your weekly cash to live on.  That includes food, groceries, clothing, entertainment, personal care, taxis (above regular transportation) and anything else that might be considered flexible.  You can spend it anyway you like.  A few more tips to keep to this spending plan: - Whatever you have in your wallet is what you are spending for the week.  You need to start thinking that when you run out of money in your wallet, you are done spending for the week. - The idea is that you can still do the things you love, but you need to prioritize them on a weekly basis.  It is much easier keeping to a weekly cash spending plan or budget than a monthly one. - Go to the ATM only once a week. - If you have a big purchase that week (i.e. groceries, hair cut), plan accordingly and don’t eat out.   This might not work for you the first time you try it.  But, it will make you much more conscious of your spending.  Don’t get discouraged and keep at it.  It will make a difference in your spending. Galia Gichon is the Founder of Down-to-Earth Finance, which offers Unbiased Financial Education.  She has worked with thousands of people, has an MBA in Finance and over 13 years financial experience. Please visit www.downtoearthfinance.com.  You can subscribe to her weekly e-mail newsletter for tips to add fun to your finances, spending smarter and understanding investing at DownToEarthFinance-on@zines.webvalence.

 

 

 

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