No Extra Cash in Your Budget? How to Free Up Cash.


If you have developed your budget and discovered that you don’t have any cash left over, or it is such a small amount that it won’t really matter, obviously you have the choice of either finding ways to make more money or ways to cut back on spending.  Over time your income should grow naturally if you can advance in your job, so it may be a matter of making sure your spending doesn’t increase with your salary.  You can also work overtime for a while if you have that option, find ways to make money on the side, or even take a second job delivering pizzas or working as a cashier.  There is also usually temporary work available during the holidays.  Really all you’re looking for is another $300-$500 per month.  If you can make a few thousand at a holiday job, you’re set for the year.

At this point I’m sure there are many who are saying there is no way they could do any of these things.  You think it is beneath your dignity to deliver pizzas, or you don’t want to work during nights or weekends, or you don’t want to got through the effort to make some money on the side.  This is why there are so few wealthy people and so many people deep in debt.  There is no magic formula.  No secret club.  Anyone with a half-decent income can become wealthy – most people just aren’t willing to do what it takes.

Understand also that this is a temporary situation.  If you don’t have money left after the end of the month, chances are that you have credit card and car debt.  If you can save and pay off these debts, you can then put the money that was going to payments and interest and use it to build wealth, at which point you can go back to a more normal work schedule.  Maybe work a second job for six months or so, use the money to pay off a car loan, and then quit and use the $500 per month you are no longer paying for the car to build up wealth.  If the car lasts at least one year beyond the time you pay it off, you’ll have at least $6000 in cash to put towards buying the next one without a loan.  Once you have a car that lasts for five or six years, you’ll have time to build up about $25,000 and be able to buy the next car for cash and have a lot left over to invest.  If you’re always buying new cars and paying a car payment, think of all the money you’re losing in depreciation and interest.

There is also the spending side of the ledger to consider.  One huge source of spending is meals out.  One can eat for a couple of dollars per meal at home starting from scratch, which does not even cover the tip in a restaurant normally.  If you can learn to cook, you can save a lot of money, eat healthier, and enjoy meal time with family.

Don’t have time?  Consider making a large pot of something and eating portions during the week and freezing portions for future weeks.  If nothing else, cook one extra meal and take it to work for lunch – you’ll be the envy of your office.  Also do time savers like making one big salad you can use for several days and having tomatoes, cucumbers, and other fruits and vegetables that don’t hold up well on the side.

Other places to consider cutting back is hobbies (maybe take up kite flying or hiking instead of golf), snacks (consider having a six-pack of Cokes in the office fridge rather than buying one from the vending machine each day, and subscriptions (do you really need Netflix and cable).  Finally, if you own something that costs a lot of money for upkeep (like a boat or a condo), it would probably be better to just rent one when you want instead of continuing to own unless you use it almost every weekend.  You’ll probably find there are others things you’d like to do besides being down at the dock cleaning the boat all the time.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Executing a Budget


Now that you have the budget (see the previous post), the trick is actually executing it.  Here again, this is where many people fall short.  Obviously, your recurring expenses are what they are and one will not go over budget there.  The issues are things like food, clothing, household, and yard maintenance items that end up costing more than you expect.

Realize that retail stores are designed to get you to buy things you were not intending to get.  You walk into the supermarket and see a great sale on laundry soap which you buy even though you weren’t planning to buy soap this week.  The hardware store has a display of tools and you find yourself picking up a set of screwdrivers even though you have a set at home and have no intention of using them this month.  You’re walking through a department store and see a display of shirts or socks or something and think, “Hey, I could use that.”  Next thing you know, you have blown your budget.  This is what you were trying to avoid in setting up a budget.

One way to avoid going over budget is to use a cash and envelope system. Beyond ensuring that you can’t accidentally spend more than you intend to for a category, using cash will actually cause you to spend less since people tend to spend less with cash than they do with credit.  In this system you bring home cash at the start of the month, or perhaps every two weeks, and place it in envelopes corresponding to the expenses it is meant for.  For example, you could have a clothing envelope, a food envelope, and a yard item envelope.  You then only buy items corresponding to the category on the envelope and when you are out of cash in the envelope, you stop buying items in that category.

This may take some iteration at first since you may find food costs more than you think, even if you are careful in what you buy.  If this happens, you need to return to the budget (with your spouse, if you are married) and figure out where the money will come from and adjust the budget.  While it may seem silly at first, this type of discipline will stop you from making spur-of-the-moment decisions that will blow the budget.  After a few months you should have a good handle of how much money is needed for each of the different categories.

Can you go without an envelope system?  Yes, but you need to be willing to track what your costs are by saving your receipts and subtracting what you have spent from your total for the category as you go.  It is probably easier to just use envelopes and cash.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

How to Set Up a Household Budget


Once you have an investment plan in place it is necessary to find a way to fund the plan.  Budgeting and planning are just math and mechanics that anyone can do,  but actually following the plan requires discipline and motivation.  This is where will power and determination will decide whether you reach you investment goals or fall short and be like everybody else.  This is similar to following an exercise plan.  Just as there will always be a little voice inside of you trying to keep you on the couch (and plenty of “friends” giving you every excuse in the book not to take that run), things will always come up that will make you want to deviate from the plan.  Here are some tricks to help keep you on track:

Most people think they can just control their spending without budgeting. People fear being constrained and being told what they can spend, even if it is just a sheet of paper telling them.  They also don’t want the hassle of figuring out their income and expenses and then keeping track.

Using a weight loss analogy again, most people will also think that they can lose weight without counting calories.  The trouble is that without looking into how many calories are actually in the foods you are eating you may have what you think is a little snack or just a few sodas you have during the day and really be doubling the number of calories you are eating.  Sometimes it is not the entrée but the sides that are adding all of the calories.

Most of the trouble in finding money to save and invest isn’t the big items like the home mortgage.  It is the regular latte after work or the snacks bought at the convenience store.  It is going out for dinner because you don’t feel like cooking and the junk you are buying at Wal-Mart that you didn’t plan to buy.  The fact is, most people who start budgeting actually start to feel more wealthy because they find all of the money that is getting sucked away that they don’t even know they are spending.

The easiest way to start to budget is to budget monthly.  Start by listing all income for the month along with bank account balances. This is your income and your storage of money.  Then, list all of your must fund expenses – your mortgage, car payments, etc…. Don’t forget utilities, gasoline, and insurance bills coming due.

Next, decide on an amount of “blow money” that you each will receive. This is money you will receive in cash that you can spend however you wish without worrying about it.  A sum like $100 each is a good start.

Sum these expenses and then subtract from your income.  Hopefully this will be a positive number, meaning that you are making more than you need to pay your minimal expenses.

Next, think of necessary but flexible expenses you have like clothing, yard and home maintenance, etc….  Decide which of these expenses are needed for the month and add these to the total expenses.  Also decide how large a budget you need for the month for food, toiletries and household items, and add these items to your total expenses. Subtract from income once again.

Hopefully you will still have a positive number.  Add this to your savings account balance (or subtract it if you are spending more than you are taking in for the month).  This is the amount you expect to have saved by the end of the month.

Congratulations – you now have a budget.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.