How to enjoy the freedom of living within your means.
Being on a budget takes discipline but it doesn’t mean you have to give up the things you love. In fact, it can help you stretch your money further, giving you peace of mind in a tough economy. Use these tips to help you stick with your budget.
Have a positive outlook.
Think of a budget as a spending plan that you control. It’s a tool to help you decide in advance how you will divvy up your earnings each month to pay your expenses. By plugging spending “leaks,” like that second latte, you’ll find money for the things you really care about.
Don’t forget the small stuff.
Remember to factor in both fixed expenses and variable ones. Fixed expenses, like your mortgage, don’t change every month. Variable expenses, like birthday presents or your electricity, may vary a bit or don’t recur every month. Save your receipts for a few months and keep a daily spending journal, so you don’t forget to plan for these variable costs.
Spreadsheet to Consolidate Your Monthly Spending
The envelope, please.
The “envelope system” is one of the easiest ways to budget. You can create “virtual” envelopes for each category of expense by electronically using a spreadsheet. Simply set aside a specific amount of money each month for each type of expense, such as food bills and clothing. Pay with your debit card so you can track your expenses in online banking, which you should do routinely. The records from your spending journal will fill in any missing expenses. At the end of the month, subtract what you’ve actually spent from what you’ve listed on your spreadsheet.
Taking these steps will help you make sure you are staying within the limits you’ve set for each type of expense. Another benefit of using debit cards for variable expenses is that many banks offer cash back bonuses on debit card purchases, which provides some extra savings on an annual basis.
Money Management Tip #2
Find out about retailers' sales in advance - you can often sign up on their Web sites for e-mail alerts or ask the sales staff when you shop.
Tap your creativity.
Don’t spend more on any category than the amount you put in its “envelope.” If you empty it too early, find a way to make it to the next month without spending more. For instance, if you spend too much money on carry-out lunches for work, brown bag it until next month.
Find new ways to save.
Once you’ve tracked your spending for a few months, you’ll probably realize that you can trim your spending in certain areas by using this system. You don’t have to cut back on all the good stuff, like entertainment, to save. Refinancing your mortgage may put even more money in your pocket or purse –to help you balance your spending.
Take action now.
Customize the amounts that you set aside for variable expenses to reflect your preferences. If, say, you feel isolated if you don’t meet a friend for dinner each month, leave room in your budget for this. Find ways to cut back on things that are less important to you.
What's next? Taking control of your budget
Some accounts and services, and the fees that apply to them, vary from state to state. Please review the information for your state in the Personal Schedule of Fees (at www.bankofamerica.com/feesataglance or at your local Banking Center) and in the Online Banking Service Agreement at www.bankofamerica.com/serviceagreement.