Why your budget may not be working
Got that nagging feeling that you’re just not doing enough to manage your money? You’re probably right, which leaves you with two options. Keep writing cheques and melting plastic until your money runs out, or get a handle on things right now by establishing some sort of spending plan.
A reasonable spending plan can provide a shot in the arm for many households – particularly those where there are dissenting views as to where the money actually goes.
Once you've decided how much your family is likely to burn through in big-ticket categories like cars, housing and food, then you can work towards either predetermined savings goals or emergency planning.
Here's one story of how someone ended up suddenly without a job -- and without a firm idea of his household’s spending.
The important thing to remember is that money is fungible, maintains economist Emily Oster. In reality, all dollars are the same. There is no such thing as a gas dollar, a grocery dollar, or a “fun” dollar.
So simply slotting expenses into envelopes depending on what you think you might spend may actually hinder you in the long run since it doesn't allow for much flexibility.
Work wear. If your workplace requires that you wear a suit and nice shoes, budget the cost of replacing items as they wear out and budget the cost of dry cleaning and shoe repair into your spending plan.
Subscriptions. Magazines, trade journals, and online publications are frequently overlooked in household budgets althiough some may be tax deductible.
Friends and family. Do you have visitors each summer or during the holidays? If so, estimate costs of extra groceries, extra laundry, and extra transportation when making a budget so these costs don’t throw your spending plan off.
Memberships. Are you or your spouse a member of a gym or tennis club? A civic organization? If so, include these costs when making a budget.
Prescriptions. It’s hard to predict prescription costs for the illnesses like flu and ear infections that strike without warning, but maintenance medications should be incorporated into your spending plan.
Pets. Don’t forget to include the costs of veterinary visits, vaccinations, and grooming when you’re making a budget.
Birthdays. Even when birthdays are low key, you’re bound to outlay some money for a cake, dinner out, or gift. If you have children, you’ll want to budget for birthday parties, even if you keep them very simple.
Do you work with a budget? Are the line items really specific or do you simply try to track major expenses? How are things going so far?
By Gordon Powers, MSN Money
Posted by: Zdzislaw | Oct 19, 2021 9:31:47 AM
MY budget is to use credit cards and pay them in full.
I buy only things I can afford but good quality .
People should not to buy cheap disposable items , they make more pollution and on long run cost
Government should tax companies more for producing low quality products .
Our governments need Your advice how to manage Our money better and do not sell Our country
to big corporations ( Irving, Brofman ,and others) .
Posted by: Eve | Oct 19, 2021 10:17:45 AM
One category for Fixed expenses and amount monthly allotted, one category for variable expenses using rewards convenience (not credit) cards and pay monthly. Combine the sum of these two categories and take 20% for high interest savings account. ie. Fixed expenses $1200. variable expenses $1200. automatic savings $240.00.
Always keep two months of expenses aside for emergencies. This formula works particularly well for retirees. But could work for anyone.
Posted by: hmmmm | Oct 19, 2021 2:35:46 PM
Eve, not to sound rude but by high interest savings accounts do you mean the ones where the advertised 'high interest rate' doesn't even match the inflation rate?
Posted by: Eve | Oct 19, 2021 4:45:50 PM
Hmmmmm....point well taken and not rude at all. One wouldn't want to leave funds for more than a year at 1.40%. Then invest in better returns (hopefully more than inflation) and hold within TFSA for future income or whatever! This is meant for modest income investors, not your day traders.