Patrick B. McGrath Ph.D.

Don't Try Harder, Try Different!


Save Money and Reduce Long-Term Stress

A budget now can stop stress later.

Posted Nov 20, 2012

You have to spend money to make money, right? At least that is what we hear. This can be true for sure - if you start a business you will have to put money into it so that you can buy materials and goods to sell and then you will have to market the business as well. So, this seems to make sense in this instance.

But, what about people who just spend and spend with little result of what their money gives them? These individuals are the ones who need some assistance in how to manage their money. Here is the most common pitfall that traps people into spending too much:

1. Not having a budget: Creating a budget may be the most important thing that you can do to assist you in controlling your spending habits. Without a budget you may have no idea where your money is going. Little things that you purchase will add up over time, but without a budget you will have no idea how many little things you have bought or how you ran out of money so fast. So, for three months, track all of the money you spend. Here are a few basics to keep in mind:

a.  Rent/Mortgage

b.  Association fees

c.   Gas / Electric

d.  Water /  Sewer

e.  Car payment

f.  Car fuel

g.  Car maintainence

h.  Home maintainence

i.  Groceries

j.  Restaurants

k.  Work lunches

l.  Coffee /  drinks

m.  Travel

n.  Gifts

o.  Non-essentials

After you see what you are spending over three separate months, average the costs and you will get an idea of how much money you will need per month. Then, take at least an additional $100.00 a month and set it aside for emergencies such as major repairs or job loss. It is recommended that you try to have at least 6 months of your monthly needs in a bank account for these type of emergencies, so saving this amount of money per month will start to prepare you in case of any potential difficulties or major bills.

Next, set aside that money and now see how much you have left. Take half of what is left and also put it in savings. Take the other half and this is money to use at your discretion and for fun. If there is nothing to set aside, then you will have to review the categories above and decide where it is that you can cut. Do you need to spend money every day on expensive drinks or can you bring your lunch to work instead of going out to eat a few days a week? How about seeing if you can refinance your mortgage to get a lower rate, or maybe get a car that has better gas mileage? A staycation may be better for your budget this year than a vacation, or look at changing your daily habits: Turn the water off when you are brushing your teeth instead of leaving it running, wash your clothes in cold water every other cycle, or put on a sweatshirt instead of cranking the heat up so much. All of these small things can help you to save money.