If you find that your income does not cover your expenses, a budget has the value of helping you to see what you can afford.
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How to Manage Your Money
If you find that your income does not cover your expenses, a budget has the value of helping you to see what you can afford. Learn to be content with the necessary things. If you have food and clothes, that should be enough. True, things like food and clothing cannot be cut out, but quite likely costs can be reduced on entertainment, sports or unnecessary luxuries.
Take a look at other expenses. What are you spending on alcoholic beverages? On cigarettes? On eating out? That can cost some families a sizeable chunk out of a week's salary. That same meat or seafood delicacy could be purchased for much less and enjoyed at home - with additional savings on gasoline, tips, and parking.
Now, what do you do with the gathered figures? There are various methods of money management that are useful.
- Cash-envelope method. In this simple system, you mark envelopes for each area into which your earnings must go: "Rent", "Food", "Gasoline", "Heating", and so forth. Using cash, you place in the appropriate envelope the amount needed to cover the expense. Thus, if some earnings are weekly, but payment is monthly, or even yearly, you enclose the cash needed up till that week so as to have the required amount when bill-paying time arrives. That surely takes a lot of anxiety out of paying bills. Remember this: Resist the temptation to borrow from an envelope.
- Checking Method. Essentially, this is the same as the envelope method, except that you deposit your family income in a bank so that the bank becomes your "envelope", and writing the checks when the bills are due is the same as taking the money out of the envelopes. The added benefits of the checking system:
- a) You may gain interest on your money while it is in the bank, which also may help toward offsetting inflation losses on money value.
- b) It is safer than keeping large amounts of cash at home.
- c) There is less temptation to "borrow" for other designated uses.
Make budgeting a family matter; involve your children in doing this. It would be educational for them to learn how much goes to their upbringing. That will help make them conscious to turning off lights, looking after their clothing, not wasting food - rather common needs in most households these days.
Above all, do not be discouraged if your first budget does not work well or soon gets out of date. Budgets, like schedules of any kind, need updating and adjusting as circumstances change. Make the needed adjustments. Things will improve with experience.
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