Budget Stretcher
(featured column)

The Most Costly Expense of All
by Terry Rigg

Do you think you have a lot of bills? If so, you are probably right. But have you considered the bill that costs you the most each month?

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On average your housing costs probably run about 30% of your take home pay. Your other bills which include utilities, credit cards, etc. also run about 30% of your take home pay. It probably takes another 30% to run your household and if you are lucky you can stash the remaining 10% in a savings account.

What are your percentages? Do you know? That's the problem. Most people run their budget out of their wallet.

There is that hideous word "Budget". Many people compare operating their finances with a budget to having a ball and chain attached to their wallet. They won't be able to get anything they want for the rest of their lives.

Let's see if the following scenario fits you:

You get paid. 
You write out your bills. 
You give your spouse some money.
You wait for next payday to get some more money so you can do the same thing.

You may not realize it but if you are doing this you are spending a lot more money than you need to.

Most of the people I work with have no idea how much money they make or how much they owe. While money may be important to them it is way too much trouble to learn how to manage it. This is the very reason there were $1.5 million bankruptcies in this country last year.

I can almost guarantee that if you are trying to run your finances like the scenario above at some point you are going to run into problems. It simply can't work.

The main reason for this is that you never get a broad picture of where you are financially. You pay the bills and hope you have enough money to buy your groceries and put gas in the car until next payday.

Most people can add and subtract. That's all there is to a budget. If you aren't willing to take the time then living paycheck to paycheck will be with you the rest of your life.

I call this "Financial Complacency" which simply means that you know you need to manage your money better but aren't willing to do what's necessary. Here are a few excuses I hear to justify this:

I don't make enough money.
I owe too much to set up a budget.
I'm not good with numbers.
I just don't have the time to keep up with a budget.
I can't get my spouse to work with me.

Do any of these sound familiar?

Well, that's the problem but what about a solution. The solution is simple no matter what your financial situation is.

First, you must find out where you stand now. That could be as simple as writing down your income and bills and expenses on a piece of notebook paper. Then subtract your expenses from your income. Make sure to include your household expenses (groceries, car gas, etc.) in your expenses.

Now look at the numbers. Do you have anything left over? If so what are you going to do with it? That's the next step. If you don't then you need to consider cutting some of those expenses.

Now you need to decide what you really want your money to do for you. Set your goals! This could be saving for your retirement, buying a home, college for the kids, getting a new car or any number of things. That's why you have to decide for yourself. There are just too many variables for someone else to help you. 

My first suggestion is that if you have credit card debt you look for a way to pay them off and stop using them. Realizing that goal could make your other goals more likely to succeed.

Now it's time to set up that dreaded budget. Where are you going to find the time and desire to write everything down that you spend and all the other stuff that goes along with keeping a budget? The answer is that you don't have to!

One of the biggest myths about budgeting is that you need to keep up with it everyday. That's the reason so many people refuse to try.

It does take a little time to get your budget setup. There are a lot of things that need to be considered. But once your finances are down on paper there is no reason to work on it except on payday. 

If you believe that managing your money is too difficult or just too much trouble consider the alternative. Not managing your money is probably robbing you of thousands of dollars a year and could lead to financial disaster.

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Copyright © 2004 by Terry Rigg, author of "Living Within Your Means - The Easy Way."

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