How To Live On A Budget

Knowing how to live on a budget is easy, but actually living on a budget can be a difficult and stressful thing to do. It is all too easy to see a new video game or the latest gadget you have to have and just plop down your money. If you can’t pay for your rent or utilities, you have a budget crisis. Making a budget and sticking to it can help you to avoid a financial crisis.

1. Make a list of your expenses. Expenses include car payments, tuition, rent/mortgage, utilities, credit card payments, food, insurance, medical bills and any recurring payments you make each month.
2. Write everything down you spend money on each day. Every latte, energy drink, bill, fast food item and anything else you buy must be included in your list. Do this until you develop a budget and stick to it for at least one full month.
3. Add the total from the first two steps. This total is the actual amount of expenses you have.
4. Compare your expenses to your income. If you have more expenses than income, you have to trim some of your expenses by doing away with non-essential items like cable or daily trips to fast food restaurants. For instance, try and cut back on the money you spend on fast food by eating food at home and bringing it with you to work or when you are on the road. Look for sales on groceries or marked down clothes or CD items. Instead of going out and paying for a movie, grab some DVDs you haven’t seen in a while and watch them at home with a few buddies. Instead of driving everywhere (if your destination is close enough), try walking or riding a bike to save on gas. If you have more income than you have expenses, you are on your way to budget-minded living.
5. Stop spending money you don’t have. Using a credit card to make all your purchases will harm your budget in the long run. Instead, buy used or buy only what you can afford. For large purchases, save your money and go without until you can pay for the item outright.
6. Save some money for hard times. Once you whittle down your expenses so they are less than your income, put back as much of that surplus as possible—ideally at least ten percent of your total income. It is nice to have some money saved just in case of an emergency or in case you fall short on your paycheck one month.
7. Allocate funds for leisure, but do so responsibly. Nothing kills a good time like not having the money to pay your bills. Put the money you can spend on leisure activities into a special envelope. Use only the money from this envelope when you go out. When the money is gone, you are done going out.