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Household Budget Detox

Household Budget Detox

Budget

The other day, while reviewing a mortgage application, I was told by the applicant about their 30 day juice diet.  My client had bought a $400 juicer and everday had 3 huge glasses of vegetables and fruit – mostly kale, carrots and apples – and that’s it; they ate nothing.

Why would anyone ever do this?

“To detoxify and loose a bunch of excess weight”, they replied.

Ok, that sounds like a good reason, but as their mortgage advisor I wanted them to take a similiar approach toward their spending habits and household finances.

So how would you detoxify your household finanances and loose a bunch of excess expenditures?

Click here for an simple to use spreadsheet.

Work Within a Budget – We all have probably made one before, but have you ever “worked within one” by reviewing and updating it consistently?  This means simply having a spreadsheet that you record into and review at a steady pace.  You don’t have to track every detail.

Start with a flow chart to classify expenses:

  1. Necessity – fixed payments and not flexible.  Examples are housing payment and car payment.
  2. Necessity but Flexible – can be adjusted.  Examples are utilities and food.
  3. Discretionary – expenses you want to make.  Examples are haircuts, supplies, dry cleaning and entertainment.

Now the hard part:  start slashing items in column three and search for ways to trim column two.

Use automated tools to execute your budget.

  • Use your bank’s bill pay service
  • Set up automatic payments
  • Use bank’s transfer service to put money into savings
  • Pay with debit card so you can track expenditures
  • If you get cash divide the money into envelopes and write the purpose on the envelope

Use the 10/10/10 Savings Rule on every paycheck.

  • 10% saved for short term needs – vacation, birthday/holiday gift giving
  • 10% saved for intermediate needs or emergencies – car trouble, loss of job
  • 10% saved for retirement or real estate investment

Have an accountability partner.  Accountability is in direct proportion with effectiveness and success. Use a family member, close friend or partner to back you up and help you stay on track.  If your finances are more complicated, use a software program, Certified Public Accountant and/or Financial Planner.

A budget can get you there.  The key to these ideas is to have a reasonable budget to begin with, sticking to the process and reviewing results.  If your money problems are too serious to fit your budget seek professional help immediately by contacting a non-profit credit counselor (a church or United Way).

If the article doesn’t answer all of your questions, please don’t hesitate to drop a question in the comments, or for direct communication, please call me at 918-949-7248.

Posted in: Company News, First Time Home Buyers, Household Finances

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