Budget Today, Better Tomorrow
Nobody likes the B word, but in a consumer culture like ours, keeping an eye on expenses can pay off big down the line.
Eyes on the Prize
Even with a decent salary, it’s tough to stay ahead. Start by taking a look at what you have on tap:
- Jot down your monthly take-home pay or other income. It’s also a good opportunity to see if you’re maximizing your tax-free savings.
- By contributing to your 401(k), 403(b) or other pension plan, you can put away money for the future that will compound tax-free. Your company may match a percentage of your contribution, too.
- Some firms offer programs that pay for transportation and healthcare with pre-tax income, another money-saver.
- Even if you think it’s in the bag, hold off on adding in projected year-end bonuses, tax refunds or investment profits to your total.
- To those who come out on top each month, congratulations! If you’re behind, you have plenty of company. And there are steps you can take to get out of the red.
It Isn’t Magic
Money often seems to disappear, but just go online and your credit card and bank statements appear before your eyes. Use them to track your spending:
- Make a list of your regular big-ticket expenses: mortgage payment or rent; health insurance; car payments, gasoline and insurance (or transit card); basic utilities like gas and electricity. Modern utilities like cell phone, broadband and cable often take a big toll.
- Food bills can be high. Greenmarkets and imported cheese are costly. Sometimes luxuries morph into necessities.
- Takeout can be a dangerous habit.
- Even ordinary lunchtime grub empties the wallet.
- That soymilk latté doesn’t come cheap.
- Entertainment — movies, sports, 4-star restaurants — will make a dent.
- Clothing: hipster or designer, Manolos or Martens, what you wear can cost big bucks.
- Vacations: expensive resorts relieve stress but can also break the bank.
- Education — college, private school and, with working parents, even preschool — are a challenge.
If you’re running a deficit (and even if you’re not), it’s good to trace where your hard-earned cash is going, then assess the information and make the best plan. For starters:
- Computer programs like Quicken help track your income and expenses. Or make your own spreadsheet.
- Once you spot where money is dribbling out, you can plug the leaks.
- A few sack lunches or cutting back on daily cappuccinos can improve your bottom line.
- Check to see if you’re really using that expensive data package on your cell phone or if anyone’s watching those premium cable channels.
- Cash machines make withdrawing funds a bit too easy. Try to note your withdrawals.
- Lifestyle changes — restaurants, clothing, vacations — are harder but worth a conversation with the family. A reality check never hurt anyone.
- Give yourself enough time to plan for upcoming educational expenses.
- Financial conditions can change. Looking at your current income and expenses can help you decide if you have too much house or whether that sports car still makes sense.
Long-term planning is important, but keeping track of expenses in the short-term counts, too. Figure out your priorities and financial goals and make sure both are working in sync to satisfy your family’s needs.