January is a great time to take a realistic look at your financial situation.
The beginning of a new year is often when we evaluate various aspects of our lives. The last two weeks this column discussed cleaning out and properly storing things in your home.
In addition to organizing and dieting — which we promise we won’t talk about — budgeting is the other area that shows up on every magazine cover this time of year.
Hmm … interesting that all three areas — organizing, diet and exercise and budgeting — deal with habits and self discipline. And, frankly, depending on your particular situation, one, two or all of them can seem overwhelming. The good news is that in each of the areas, small changes over time can make a big difference.
While, as we promised we won’t be talking about healthy habits for your body, we do have expertise in working with budgets.
Typically we work with folks to help them figure out how they can afford to buy a home, but we here at NeighborWorks of Grays Harbor, are also available, free of charge, if you need help creating a budget.
Just call to make an appointment with our certified housing counselors, Kelly Cooper and Julie Galligan.
We picked Kelly’s brain this week to get a few tips on getting a handle on budgeting.
JUST GET STARTED
Sometimes an aim for perfection can be the enemy of “better.” That can definitely be true when dealing with budgeting.
If you are like most people, you have some financial concerns and some financial goals. Instead of thinking that you will solve all of them this month, if you can change your thinking to embarking on a “budgeting journey,” you will likely get closer to your goal instead of getting waylaid by disappointment.
So, we suggest you just get started.
WRITE IT DOWN
To begin this journey, two beginning steps must be taken.
First, do your best to estimate what income comes in every month to your household.
Obviously for some folks that’s super easy — they are paid the same once or twice a month. Other folks have it slightly harder, if they’re paid every two weeks, their monthly income can vary a couple of times a year. Still others have quite varied incomes. Perhaps they own their own business or work on call or on commission. Whatever your situation, figure out what income comes in and when it’s received.
If in doubt, be conservative with your estimate! It’s a lot easier to “deal with” more money than expected in your budget, than less!
After you figure out what your income is, begin doing your best to write down your regular expenses, Kelly said.
Go back through your memory, checkbook, credit card statements, bills paid online, etc., to see what you spent in the last month on things like rent or house payment, insurance, car payments, power, garbage, cable, phone, groceries, clothing, eating out, transportation, etc. , etc.
It’s up to you how to organize your categories. Is it more convenient for you to put groceries with household sundries — toilet paper, cleaning solutions, etc.? Or, would you like to track those things separately?
As you begin the process, of writing down what you spend, Kelly strongly recommends that you also note when your key bills are due.
For instance, even if you are following your prescribed budget, you don’t want to do your major grocery shopping the day before your rent is due if you don’t have enough money in your account to cover both.
So, either leave yourself some extra money in your account for wiggle room, or plan ahead which bills are paid on what day of the month.
By the way, as you begin the process, you can do it on anything from budget forms found online, a new budget book found in a stationery store, a computer spread sheet or a simple piece of paper. Remember, as you begin this process, your budget will likely be a living, changing document – especially at the beginning.
Certain bills – like “power” or “gifts” – can change a lot from December to July. Just do your best to estimate what your average is for each category. (It’s also helpful to know what the range is – your PUD bill is a good example – when key bills vary from month to month, so you can plan ahead.)
The point is you’ll need to take a good look at your “actuals,” first before you decide how much money you “should” be spending in certain areas or where you should cut spending.
THE LATTE FACTOR
If you’re thorough and honest with yourself and what you’re spending, we predict that you will likely be surprised by the “latte affect,” Kelly said.
That is, most folks are surprised to see written down how quickly that daily latte, pack of cigarettes, or weekly manicure and fast-food stop or drinks with friends, adds up.
We’re not saying you have to live a pleasure-free existence.
However, it is good to see in black and white how much the little “extras” cost so that you can make calculated decisions on what to spend.
For instance, if you’re spending $5 each working day for a fancy coffee that adds up to more than $100 a month – more than $140 a month if you’re enjoying a cup of Joe on weekends too.
If you decide to make coffee at home most days and just treat yourself once a week, you can easily save $80 to $120 a month and still feel like you have an occasional treat!
Eating lunch out every day or smoking a pack of cigarettes a day can be other common expenses. Once you figure how much it is costing you, you can decide if you want to cut the activity out totally or just cut it down. Even cutting it down can save a lot of money.
Of course the same is true for expensive cable TV packages, cell phones or frequent trips to the movies.
Again, it’s not for anyone else to decide which things are “worth it” to you. However, if you start writing down your actual expenses you can see what the real costs are of your various expenditures and make informed decisions for yourself.
Next week we’ll share more of Kelly’s tips on different ways to work toward a financial goal including getting out of debt.
Dave Murnen and Pat Beaty are construction specialists at NeighborWorks® of Grays Harbor County, where Murnen is the executive director. This is a non-profit organization committed to creating safe and affordable housing for all residents of Grays Harbor County.
Do you have questions about home repair, renting, remodeling or becoming a homeowner? Call us at 533-7828, write us or visit us at 710 E. Market St. in Aberdeen.