Better than a raise: The smallest thing you can do to make the biggest difference this year
Will VanderToolen, director of counseling services at AAA Fair Credit Foundation in Salt Lake City, says one easy way to begin budgeting is to just start tracking discretionary spending. "Don't worry about the groceries, housing or other utilities," he says. "Just keep track of how much you spend on things like clothing, entertainment, music, fun, toys for the kids."
Then, use that information to help establish how much you want to spend each month on discretionary things.
Arthur Moye, the CPA in Fresno, says a simple step is just to track everything you spend. It is a first step before planning what to spend. He also says it may help to put that budgeted discretionary spending amount on a prepaid credit card. "When the money on the card is gone," he says, "then you are over budget."
Holmes, the financial planner from Bellevue, Wash. and Butler with You Need a Budget both recommend that a first small step would be to set a purchasing goal — such as saving up for a trip or even something smaller like a snowboard. Decide iwhen you want the item and then divide the cost into that number of months. "It is a good way to see the effects of budgets," Holmes says.
Butler says goals are the essence of what a budget should be.
VanderToolen says that ultimately, budgets are about empowering people.
"The most important math that we will ever do throughout our lives is managing our cash flow," he says.
Holmes sees discretionary spending as a major way to control cash flow. Planning for the big items doesn't give people any feeling of restrictions — but trying to cut out little purchases here and there can be uncomfortable. But those $3 lattes can add up. "And everybody has their own 'lattes' they want to buy," she says.
Telfer thinks a budget isn't the only way to control purchases.
"I think you can be smart about money," she says, "without explicitly having a budget. Financial advisers would probably disagree that just having a sense of your finances is a feasible way to live."
In the meantime, Telfer hasn't quite found that budgeting magic bullet. She is still open to trying again. It is, after all, almost a new year.