One of the budgeting methods that my husband and I have found helpful over the years is to look everything we purchase through the lens of the monthly payment. The goal is to minimize the amount of money that has to be spent ever month, leaving more room to save for special or unexpected expenses.
I am not talking about making the minimum payment on your credit card! Those should be paid in full every month, if you even use credit cards. If you do have any credit card debt, getting that paid off should be a priority.
What I am talking about are those expenses that occur each month, some are the same amount, some vary a bit–
1. Car payments – We minimize these by paying cash for our cars. That’s not an easy task, but one key is to plan on keeping your vehicles for a long time. We are currently driving a 1992 Honda Accord and a 1996 Chrysler Town & Country. When we had to replace the transmission in the mini-van we considered not spending that money on such an old vehicle. But when we did the math, paying to fix that vehicle was still less expensive than replacing it.
2. Electricity – Are you following all the recommended energy reduction tips from your electric company? How old are your appliances? Are you running an old refrigerator or freezer in the garage that you don’t really have full? Older appliances cost a lot more to run, you could try unplugging it for a month or 2 and see how much it’s costing you. What about heating and cooling. When we’ve need to replace appliances and a heat pump, we pay a little more up front, in order to pay less on electricity each month.
3. Water – Our water and sewer rates are high. Saving water may not be as financially helpful for others, but it is big for us. We make sure to not let any toilets have a slow leak. We don’t wash our cars at home. (I could about say we don’t wash our cars.) We try to follow the other standard tips for saving water as well – no running the water while you’re brushing teeth or washing hands, run full loads of laundry (not a problem with that!), etc.
4. Internet service, cable, phone, and cell phones – I’ve lumped all these together because very often your best deals are found with bundling. The first thing to consider is if you need a service at all. Many people no longer have land lines. We found that we are still paying way less money for our pay-as-you-go cell phones and our cable phone line. But we don’t use our cell phones much. If you do and you have reliable service at home, it might make more sense to not have a land line. What about cable TV or satellite TV? Many people consider that a necessity, but is it really? We do have cable TV currently because of the bundle deal we signed up for at the first of the year. We have our phone, internet, and cable all tied together. The cable is not costing anything more than it would cost for just internet and phone. Will we keep it when the price is raised? Absolutely not (and we made sure we could cancel at any time before we signed up.) Be very careful when signing up for deals on these services. These are areas where you can easily get locked into a contract requiring you to keep a service even if you realize you don’t need it.
I have found this way of thinking about our budget has helped us save for bigger purchases that we need or want to make, and helped us to stay out of debt. I hope it helps you.