Questions and Answers About Budgeting and Your Family's Finances

The Surprises You Discover When You Make a Budget

by Jeremy

Most of us, at one point or other, start a budget. Some of us are natural budgeters. It just makes sense on some level to these people. But, there are often many surprises you find when you make a personal budget.

Carefully managing every dollar is wise. So, why wouldn’t you do it? Well, for other people this isn’t so easy. Just because budgeting is sensible doesn’t mean they do it regularly or rigorously.

Along with working out three times a week, eating many helpings of vegetables a day, and performing preventative maintenance on the water heater, just because something is smart to do doesn’t mean we always get it done.

The thing is, once you carefully make a personal budget and follow a budget for at least one month, you start to learn some surprising things about yourself and your spending habits. The image you have of your finances in your head likely does not correlate to reality in any realistic way. In some cases, we learn that things are better than we thought (hooray!), but in most cases, we learn that our money is being wasted more than we wanted to think.

This is one of the main reasons people don’t budget in the first place. There is a sense of dread that, once personal finances are examined, so many problems will reveal themselves that it will take too long to fix them, with too much tough work expended along the way.

It’s the same impulse that keeps us away from the dentist office, even though we haven’t been in a couple of years or more. We know that going will repair the damage, but the process is so uncomfortable that we put it off, sometimes indefinitely.

However, you manage to screw up the courage to perform your first budget, make it happen. Take a careful look at every dollar you spend for a month, and track exactly where it goes relative to your budgeting goals. Many people discover things that surprise them. Here are just a couple of examples.

How You Can Budget With A Credit Card

by Hank Coleman

My wife and I budget a little differently than most families. We budget with a credit card. We use a credit card for most of our purchases instead of cash or checks, and use that to monitor our family’s monthly spending.

According to a recent Gallup poll, fewer than one-third of Americans follow a detailed written budget every month. Out of those who do, not all of them strictly follow their budgets. This may be a stark indication as to why American families are in financial trouble, with shrinking savings and increasing debt.

So why do we have such a hard time sticking to a budget? Perhaps we feel our spending is often too hard to track. If that’s the case, we might need to simplify things.

Budgeting the Traditional Way With Cash and Envelopes

Many financial experts, like Dave Ramsey, recommend that families use a written monthly budget and account for every dollar they spend. Ramsey even goes so far as to suggest that families use a cash envelope system, in which there’s an envelope for every category in your budget such as housing, entertainment, gas or groceries.

For example, if you and your family budget $100 each month for eating out, you would place $100 cash in an envelope. You spend the cash until it’s gone. When the envelope is empty, your family has to stop eating out.

There’s a reason people say cash burns a hole in your pocket.

My wife and I found that the envelope system worked — as long as I remembered to bring her the receipts after making a purchase. But I can’t even remember to use a coupon I have in my pocket at the cash register most days, let alone track receipts.

So the envelope method of budgeting just didn’t work for us. That’s why we switched to budgeting with America’s favorite financial invention — the credit card.

Are Your Budget Assumptions Throwing Off Your Family Finances?

by Hank Coleman

How accurate is your family’s monthly budget? Do you have false budget assumptions in your family’s monthly budget? Do you guess at certain things that you put in it? You’re not alone. A lot of people do not have the right math in their family’s monthly budget.

You need a budget, but you also need an accurate budget. Budgets are built on both facts and assumptions. You know exactly how much money your home mortgage will cost you. You know how much your car payment or credit card minimum balance payments are at the end of each month. But, there are many things in your budgets that you don’t know exactly how much they will cost you and your family. It is these assumptions that will eat at your budgets and could possibly throw them off.

Why Your Math Budget Might Be Off

There are two types of costs in our lives, just like the costs of a business. You have both fixed costs and variable costs. Your car loan payment, mortgage payment, and the like are all fixed costs. They are the same amount of money every month, and you can accurately predict them from month to month with almost perfect certainty.

Then, there are the variable costs of living. These include things like your water bill, your electricity costs, and other discretionary spending. Discretionary spending accounts for many of these variable costs, and they have some of the biggest impacts in our budget. They are, more likely than not, to be the areas that throw our family’s monthly budget out of whack. Here are a few monthly budget assumptions where our families are most likely not hitting the mark with their forecasts.

Potentially Wrong Family Budget Assumptions

Gas Prices: If you have a set amount of money earmarked for your gas purchases, this category in your budget has one of the highest likelihoods of being blown out of the water. Most people set a figure that is too low for their family’s gas usage.

Gifts You Give: Do you account for all of the gifts that you give throughout the year in your family’s monthly budget? You might have a number listed in your budget as one of your budget assumptions, but it may not be more than a swag.

How much do you give in gifts for birthdays, Christmas, or other holiday gifts? If you add up the number from last year, you can simply divide by 12 and save that amount each month, setting it aside in your budget, in a savings account. I like to nickname my savings accounts listing what it will be used for.

Going Out To Eat: If you are not watching this category in your budget like a hawk, you can be greatly surprised by how much money you spend going out to eat each month. The same can be said for going to the movies and other entertainment expenses. Do you increase your budget assumptions when you expect family to come into town? This can quickly be a budget buster.

How To Use Prepaid Debit Cards To Budget For Big Purchases

by Guest Contributor

This is a guest post by David Silverstone who writes about personal finance, credit cards, and debit cards on the website, Credit Card Insider, which is a credit resource, providing plain-language guidance from industry leaders.

Credit card debt is huge in the U.S. Last year, the average American household’s credit card debt was equal to $15,799. American consumers know that they need to eliminate this debt, but they also know that they will have large purchases to make in the future.

These larger purchases may be necessities, such as refrigerators, new cars and houses, but it can also be a pleasurable expense, such as a fabulous dream vacation. The new trend is to save for these purchases so that consumers do not have to use their credit cards, and some people are choosing to embark on this adventure by engaging in reverse budgeting using prepaid debit cards.

What Is Reverse Budgeting?

Reverse budgeting is way in which people save for their purchases without having to resort to burdening themselves with more debt. First, consumers decide how they would like to use the money they are going to save. Then, they will calculate how much money they will need to pay for their dreams. The next step is to determine how much money they can set aside per month to save for their goals.

Reverse budgeting has been growing in popularity, and the reason may be because so many Americans already owe so much money to their creditors. One way that people have begun to save for future purchases is to obtain prepaid debit cards.

How Do Prepaid Debit Cards Work?

Prepaid debit cards are an extremely convenient way to make purchases, and they prevent people from spending more money than they have. Furthermore, it’s really easy for consumers to add funds to their prepaid debit cards and even adding money to the best prepaid credit cards and increase their prepaid spending limits every month.

After they have succeeded in saving the amount of money they needed for their goals, they can use their cards to pay for the item online or inside the store. They can also use them to pay several different bills online.

Advantages of Prepaid Debit Cards

Prepaid debit cards do have their advantages and disadvantages. Consumers like credit cards because they eliminate the need to carry a large sum of cash. Those who would like to keep from adding to their credit card debts cannot resort to using credit cards, but if they have a prepaid debit card, they can travel all over the country or even outside of U.S. borders and have a safe method of payment that is widely accepted.

The amount of money that is on the prepaid card is all that consumers can spend. If they were to try to purchase something outside of their budgets, the card would be denied.

The Little Expenses Incurred Can Quickly Add Up

by Hank Coleman

I have to admit that when I stand in line at the grocery store (or any store for that matter) that I am always tempted by the impulse purchases in the racks by the checkout counter. What’s the harm in those little expenses incurred?

It is only a dollar or two, right? But, those dollars add up. It is the little expenses in our lives that can really get us into trouble and knock our family’s monthly budget out of whack if we are not careful. The little expenses add up over time.

We Study Large Expenses Incurred

We bend over backwards to find a great deal on a new car, when we buy a new home, or even a large purchase like a new television. But, we tend not to think about the small purchases we make.

I think that it is almost the equivalent to pigging out at a restaurant and ordering diet soda. Far too often we think that we are being good financial stewards of our money be studying the large purchases we make to death.

Top 4 Easy Ways to Save Money Every Month in Your Budget

by Hank Coleman

Most people do not think that they have enough money to save for retirement. I can remember asking my mother if she had any investments, stocks, bonds, and the like as a little boy. She told me that we barely pay the bills, let alone invest for retirement. I’m here to tell you that everyone can find easy ways to save money from funds leftover in their budget to begin investing. The real problem is if you want to make room in your budget. Do you want to do without 200 cable channels? Do you want to skip the trip to the coffee bar every morning and brew your coffee yourself? Many people say no, and that is why they … Read more