4. Get all your bills in one place. Since bills arrive at all different times of the month, we often pay them at all different times of the month. From there, they either get filed away or recycled. Because of this, many people are not completely aware of how much money they really need to set aside to cover these obligations. A good first step is to collect every statement for each month together in one place and add them up. Keep in mind that variable bills like electricity and water change from month to month, and are especially high during the summer in Arizona, so it’s a good idea to use statements from the summer months for budgeting purposes (in the winter months, you can use the extra cash to contribute to savings!). Add the amounts of your bills together and add 5-10% for a “cushion”. Now take your monthly income and subtract out the total bills plus your cushion. Now you know exactly how much you have left for other expenses.
5. Look at past spending for a starting point for other budget items. How much have you spent in gas? Groceries? Entertainment? Eating out? Don’t forget about incidentals like clothing, gifts for kids’ birthday parties, materials for minor home repairs, etc. Look at your debit card statements and add it all together. Many online banking sites can even categorize your spending for you. Make sure you also include credit card and cash expenditures so that you can get an accurate total. One of the biggest budget busters can be simply not knowing how much you are spending on things. The key idea for this step is to become familiar with where the money has been going in the past, so for now, just write down the total amount that you have been spending. The next few steps will deal with getting your bills and expenses down to size.
6. Critically examine your bills. Look at what you are paying for each month, and ask yourself if it is worth it. Do you really need cable TV when you can watch all of your favorite shows online? Do you use that unlimited data plan on your cell phone, or can you cut it down? Can you switch to a time-of-use plan to save on electricity? Be realistic about what you will be able to accomplish. If you know you won’t be able to adhere to a time of use plan, signing up for one can actually increase your electric bill. Also, don’t be afraid to call each of your service providers and ask for a discount. For example, if you have had Cox cable for a length of time, you might be eligible for a loyalty discount, or if you don’t mind signing a long-term contract, you can get a discount that way. Many service providers are very accommodating in order to keep your business – use this to your advantage!
Continue to Part Three.
Return to Part One.