newjerseynewsroom.com

BY LESLIE OVITT

NEWJERSYNEWSROOM.COM

27 AND FRUGAL

For many, getting finances under control is a new year's resolution. One of the best ways to do this, is to observe and budget your spending. January is a great time to start budgeting so you can begin fresh and continue with a monthly budget throughout the rest of the year. However, before you can start to budget, you need to know how much you currently spend.

Be Realistic

Budgets will fail if you underestimate your spending. For example, if you budget $100 for your monthly grocery spending, then find you've already exceeded this by the second week of the month, you'll give up on the entire budget calling it a ‘waste of time.' A budget is only successful if it is realistic.

First, Determine Your Expenses

Take out a small sheet of paper. Don't worry, this is not a test. Write down every fixed monthly payment you have. These payments should not fluctuate from month-to-month. Examples of fixed payments are rent, electricity, cable, credit card payment, car insurance, phone, car payment, and savings.

Now, view your online bank statement for the last stable month and write down how much you spent in each of these categories on the sheet of paper. Add all that up and write the total at the top. This is the minimum you need to spend every month to keep the bills paid.

On the same piece of paper, write down your variable monthly spending. Gas, entertainment, health/beauty, groceries, restaurants, clothes shopping, all fall under this heading. Again, view your bank statement to find your expenses for each category. Add these up and write the total at the top.

Now, take a look at this paper. Does anything stand out to you? Are you spending more on eating out than you'd like? Was your electricity bill higher than you thought? Keep these thoughts in mind when making your budget.

Second, Set a goal

Budgets fail when you don't have a goal. You need to be saving for something to keep up your motivation and discipline. Are you trying to save up for a trip? Do you want to increase your emergency fund? Do you just want to cut back on the amount you spend at restaurants? Are you saving to buy a new car? Whatever your reason, you must have one.

Also, having a goal means you know how to set-up your budget. Say your goal is to save money for a big vacation. In that case, you'll want to put more money into your savings account each month than you are now.

Third, Budget

Now, you can actually start budgeting. Start with your savings. Since this is the priority, you will want to make sure you have enough money to put what you want into the savings account. Also, be sure to put more in there than you were before (remember your goal?). Then just go from there.

Be realistic. If you spent $300 in groceries last month, don't budget $100 this month — that won't work. You could, however, budget $250. You will just have to use some discipline to keep from spending the extra $50.

At the end of the month, look over your budget and see how you did. Continue to use this as a template for the rest of the year, but remember to make changes accordingly.

Stick to it

Now that you have your realistic budget ... Here comes the hard part — sticking to it throughout the month.

Start by looking at your budget once a week. A week's worth of expenses will not take that long to track and you are more likely to stick to your budgeted spending amounts for the rest of the month.

Also, there are various websites you can use to help you remember to look at your budget. Mint.com, Google Calendar and Remember The Milk all can send you email or reminders.

Focus on your Goal

Tracking and budgeting your expenses are necessary to keep your finances in order. Remember to look over your budget once a week to make sure your spending is on track for the month. Use your budget to prioritize and focus your spending habits and always keep your goal in mind.

Leslie Ovitt's personal blog, 27 and Frugal, describes ways of living a full, yet frugal, life.