In Part 1 of "Budget Busters," we identified sections in our budget that keep us living in the red. Now that we know why we run a deficit each month, one question remains.
How can we keep our costs from breaking the bank each month? Here are some ideas.
- Purchase a home only if total housing payments (mortgage, taxes, insurance, utilities, phone, and maintenance) do not exceed 38 percent of Net Spendable Income.
- Do not finance a second mortgage for a down payment and do not finance closing costs.
- If trading, make sure it is a need and not simply a desire.
- Plan a weekly family menu and stick to it.
- When shopping always use a written grocery list and do not deviate from it, if possible.
- Avoid shopping when hungry or in a hurry.
- Avoid expensive prepared and frozen foods.
- Purchase sundry items, household cleaning products, and paper products at discount retail stores or retail warehouses.
- Shop advertised specials and use manufacturer's coupons.
- Try generic or store brand products.
- If at all possible, avoid shopping with small children.
- Automobile expenses (monthly payment, repairs and maintenance, gas and oil, tags and taxes, and insurance) should not exceed 15 percent of Net Spendable Income.
- Evaluate the reason for trading. Is it a need or simply a desire?
- Can a present car be repaired for less than six monthly payments on a new car?
- Pay cash for a new car if possible. If not, make sure the current car is paid off before purchasing a new one.
- Buy a quality used car rather than a new one.
- Avoid car leases.
- Perform routine maintenance and minor repairs yourself.
- Purchase supplies at wholesale distributors.
- Use the cheapest gasoline recommended by the owner' manual.
- Consider dropping collision insurance if the car is four years old or older.
- Destroy any credit card that you cannot pay in full each month.
- Establish a payment schedule that pays all creditors regularly.
- Buy with cash and sacrifice wants and desires until debts are current.
Medical and dental
- Teach children to eat the right foods and clean their teeth properly.
- Take care of the physical body through diet, rest, and exercise, and it will most likely respond with better health.
- Question doctors and dentists in advance regarding costs.
- Shop around for prescriptions and ask for generic drugs.
- Use payroll deduction, if possible, for savings. This removes the money for savings before it is received as salary.
- If payroll deduction is not available, use automatic bank withdrawal from the checking account.
- Write a check to the savings account as if it were another creditor.
- When an existing debt is paid off, reallocate that money to savings.