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The Pocket Idiot's Guide to Living on a Budget
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Why You Might Need This Book
"Living on a budget": The very phrase conjures up grim visions of takingthe bus to work, suffering through endless meals of beans and rice, and carefullyreusing your vacuum cleaner bags.
But is this what living on a budget is really all about? We, your erstwhile authors,don't believe so (or else we wouldn't be living on one!). We believe that livingon a budget is about wisdom and discipline, not about deprivation.
Living on a budget simply means making a conscious decision to keep a close eyeon your expenses and income and making sure you don't spend too much of one on theother! That, in a nutshell, is what budgeting is all about. It's not about buyingshoddy goods, and it's not about leading a dull life of austerity. It's about masteringyour money and making the most of every dollar you have!
Budgeting works. Regardless of the size of your income, budgeting works. Joinus now to learn more about living happily on a budget.
So, who needs to live on a budget? Everyone who wants to feel in control of theirfinances, anyone who wants to take pride in watc hing their money grow from monthto month, instead of watching their money dissolve, and folks who are trying to dothe following:
- Conquer the onslaught of monthly bills
- Lower living expenses with the goal of increasing savings
- Achieve a dream of early retirement
- Opt out of the shop-and-spend cycle
- Save for a major purchase like a car or a house
- Or achieve other financial goals
Budget A simple financial plan that helps you track your expenses and income.
The bottom line is that living on a budget is for anyone interested in his orher bottom line!
"What I want more than anything is to wake up in nine years and have the ultimate luxury--the freedom to spend my time doing anything I want to do," reads a recent letter to the editor of a popular financial magazine. The letter-writer describes himself as earning a six-figure income, but living as though he makes $25,000 a year. He is 41 now, and by carefully living on a budget, he plans to retire at the ripe old age of 50.
Ever Run Out of Money Before You Run Out of Month?
It's a classic scenario, one that has happened to almost every adult at one timeor another: Suddenly, you discover that the checking account balance is at zero,your bills are all due, and your next paycheck isn't coming for another week or so.It is not a pleasant feeling, and not at all conducive to a restful night'ssleep . Many of us face this same situation every month, like clockwork. What to do?Budget!
By drawing up a simple budget plan, vowing to stick with it, and then followingthrough, even folks who face this dire situation every month will be sleeping throughthe night in no time.
By vowing to live on a budget, you can soon get a handle on all your bills--evenpast-due bills--and pay them off in a timely manner. Once you embrace the idea ofliving on a budget, you can also work to overcome the spending habits that got youinto trouble in the first place!
Go Ahead, Open Those Bills!
Ahhh, doesn't that sound like a much more appealing scenario? Imagine your pridewhen you open your bills without apprehension, knowing you can meet this month'sbills with ease.
Men, Women, and Money
The Macy's bill arrives in the mail...and someone goes ballistic at the sightof the balance. Perhaps a husband is horrified by his wife's shopaholic habits. Couldjust as easily be a wife annoyed by her husband's profligate ways, though. Whoeveris out there doing the spending, there's bound to be a fight when the bill finallyarrives.
What do most American couples fight about? Money. From the tippy-top of the economicstrata and on down through the rest of the classes--almost every married couple fightsabout money.
Seven Out of Ten
Here is a quick snapshot from a recent USA Today article. They discoveredthat seven out of ten couples disagree about financial issues. The most common conflictsoccur over the following issues:
- The use of credit (17%)
- Shopping and spending habits (16%)
- Sticking to a budget (13%)
- Not writing down checks and bouncing checks (8%)
- Paying bills (7%)
- Saving and investing (6%)
How can couples escape all this conflict? Budget! In a later chapter, wealso discuss how to agree with your mate about sticking to a budget. Budgets don'twork unless everyone involved pulls together.
Men and women fight about money for all kinds of reasons. Sometimes it is aboutemotions, sometimes about power and control, sometimes about love--and sometimesthose fights about money end in divorce.
However, couples can use money to strengthen their relationship, to grow evencloser. By working together to create a budget that meets their needs, by agreeingto live by the basic budgeting principles, and by focusing on the mutual financialbenefit they are working toward, couples can use living on a budget to enhance theirrelationship. You will soon find that what's good for your relationship is good foryour net worth, too!
Most married couples disagree about money at some point in their relationship. Unless both parties agree to follow the same budget, the effort is doomed to failure. The most common cause of financial disagreement? Credit card spending!
Seems like all you do is wake up, eat, work, eat, work, eat, watch a little television,and sleep. Your life is just an endless cycle of drudgery, and all your money goesjust to support your dull live the way it is. Will you never get to jog on the beachin Hawaii? Will you never feel the wind in your face as you drive the coast in aconvertible? Sigh. You just plain can't afford those kinds of treats. Other peoplecan, but you feel destined to watch from the sidelines. Hmmm...what's the answerhere? Surprise--budget!
Careful budgeting can help you achieve extraordinary financial goals. Vacations,second homes, a really cool car--whatever you set out to save for can be accomplishedby carefully sticking to a budget and watching your special savings grow!
Careful budgeting can also help you rediscover that some of life's greatest rewardscome free. You might well find that your idea of a treat turns out to be a morningwalk in the woods near your home, an afternoon at the public library, or an eveningat home in front of a roaring fire with friends and a battered Monopoly set. Whileliving on a budget and watching your money grow, you might realize that the kindsof treats and indulgences that truly make you happy can't be found in a departmentstore, at a mall, or on the pages of a catalog.
After you wean yourself from some of the spending habits you once had, not onlywill your bills be paid off, but you won't ever run them up again with those kindsof expensive purchases!
Net worth What you own, minus what you owe.
Budgeting and saving sound like something only middle-class folks have to do.The really rich folks just spend whatever they want, right? Wrong. According to anitem in Business Week magazine, the rich squirrel money away much more thanother income levels do. So next time you want to be mistaken for a wealthy person,drive straight to the bank and make a deposit. And stay away from that ATM machinewhile you're there!
Perhaps you don't have a shopping mall addiction or a tendency to live well beyondyour means. Regardless of your careful shopping habits, however, you still find thatat the end of the month the money seems to have disappeared. Where on earth did itgo? Perhaps you simply frittered it away a dollar or two at a time.
What do we mean by "frittering"? You know: the Starbucks Syndrome. Moneycan all too easily be frittered away every time you rush out the door late to workand pull into the cafe drive-through lane for a cappuccino and a low-fat muffin.Money can be frittered away if you buy a new magazine every day to keep you companyat lunch. And then there's the nightly visit to a sports bar for a beer and a plateof Buffalo chicken wings. One dollar here, two dollars there--it can all add up tothe difference between ending the month with extra money and ending the month withzip.
Frittering is sometimes hard to spot. Later in the book, we cover the importanceof writing down all your expenditures to get a real idea where the money isgoing. This way, you can quickly uncover frittering.
A Clear-Eyed View of the Present
So let's get down to business here. Have you recognized yourself in any of thedescriptions we've offered so far? Are you in over your head because of excess shopping?Do you and your mate tangle regularly over financial matters? Are you just "gettingby" on your current salary? Or are you just looking for a more reasonable wayto live? Whatever your reasons for deciding to live on a budget, you've come to theright book.
As we've already hinted, we don't think that living on a budget means scrimpingand saving and buying only the very cheapest stuff. We believe that living on a budgetis a wise approach to handling your money in today's economy, and we plan to showyou exactly how you can use a budget to create the life you want.
But first, you have to look closely at the life you have now. In the next fewchapters, we walk you through a careful assessment of your present financial situation.Why does that matter? Because you can never design a workable budget without firstassessing your life and your relationship to money. If you are spending thousandsof dollars a month more than you earn, designing a budget that reduces your expensesto less than $500 a month is doomed to failure. Realistic, steady goals and objectivesare needed for a budget to succeed. Remember what we all know about weight loss--crashdiets don't work. And neither does a crash money diet.
Learning more about how you use money now is such an important piece of the puzzlethat we don't actually help you design your first budget until Chapter 5, "TheLast Few Steps." (Please, no skipping ahead.) Learn all you can about your familyspending habits and the way you use money now. All the thinking and soul-searchingwill pay off in the long run. You will end up with a renewed sense of what's possibleto achieve on your income--the very thing that seems so impossible now!
A Misty-Eyed View of the Future
Before we let you go on to the next chapter, let's spend some more time thinkingabout just what living on a budget can do for you. The best way to convince yourselfto buckle down and change your money habits is to paint a vivid picture in your mindof just where it's going to lead, so let's do that right now.
If, starting now, you make the decision to begin to live on a reasonable budget,this is what your life can be like:
- You will sleep easily at night and never be plagued by anxiety and stress over how you are going to pay that looming bill.
- You will take pride in your skill in handling your family finances and not be ashamed or afraid that you might someday be revealed as financially incompetent.
- Never again will you watch nervously as the sales clerk runs your credit card through the machine, fearing the possibility of rejection.
- By carefully building up reserves and emergency funds, you will be able to deal with financial emergencies and not find yourself wrecked by the first unexpected bill that comes up.
- By working with your mate to design a budget you can both live with, you will no longer live in a household where money is an issue.
- Through careful planning, you will be able to give yourself life's little treats, as well as some of life's big ones. You really will be able to afford that (fill in the blank with your deepest desire) you've always wanted.
- By careful budgeting, saving, and investing, you can look forward to a peaceful retirement without worrying how to pay for it.
Sounds darn good, doesn't it? So what are we waiting for--let's get in there andstart to work on a budget!
The Least You Need to Know
- Living on a budget doesn't mean depr iving yourself of life's pleasures.
- Everyone, regardless of income, can benefit by adopting the basic principles of budgeting--living within your means and having something left over at the end of the month.
- Living on a budget helps you avoid the "run out of money before you run out of month" syndrome.
- Most husbands and wives fight about money, so agreeing to live with a reasonable budget can lessen that relationship tension and stress.
- By careful budgeting, you will find yourself able to afford some of life's little treats and not feel deprived.
- Sometimes the culprit is not spending too much money on big purchases, but spending too much money on many little purchases!
- Adopting a reasonable budget and learning to live by its principles can gain you many a sound night's sleep and a rosy future.