Budgeting After Bankruptcy (Part Four)

In the first three parts of this post, we discussed dealing with big things in your budget–houses, cars, 401(k) savings, and the overall goal of budgeting–to spend less than you make thereby creating wealth.

Now, go micro!

For most problems, including budgeting problems, it’s best to look at the big picture.  You don’t want to lose the view of the forest for the trees.  And that’s what we’ve discussed until now.

But after dealing with the big expenses and an overall savings strategy, it’s time to go micro. You can do this high tech with a computer program like Quicken, or you can do it low tech by just writing everything down. But you need to keep track of every penny you spend. As they say in Weight Watchers, “You bite it, you write it.”

The goal

The goal now is to strain all the fat out of your budget.  Here are some expenses to examine:

• Your cable bill. Are you paying a small fortune for cable TV each month?  If so, cut your services back as far as you can. Check out Netflix or other low-cost alternatives.
• Your utility bill. Keep your HVAC units in good working order with annual inspections. Change your filters regularly. Turn up your thermostat in the summer and down in the winter.  Even a degree or two can make a significant difference.
• You transportation costs. Carpool when you can.  Combine trips–don’t drive to that town 30 miles away when you’ll be going there next week. Kill two birds with one stone.
• Your clothing costs. Shop at consignment stores. You’d be surprised at the nice things you will find–many of which are almost new.
• Your grocery shopping. Use coupons. You don’t need to be an extreme couponer, but pay attention to coupons for items you regularly use. And look out for “BOGO”–buy one get one free.  (This is my wife’s favorite tip.)
• Your eating out. Cut it down to a minimum. This is a major budget buster.  Yes, you need a break, and yes, you deserve some fun, but keep it to a minimum.
• Your credit cards. Don’t.  (Need I say more?)  Use a debit card.
• Use your imagination. Each household is unique.  Look at where your money goes. Pay attention to detail.

And consider the envelope system

This is an old, old technique.  In fact, my grandparents used it.  Keep a set of envelopes for discretionary spending–like eating out, entertainment, and so on. Allocate cash (and I mean cash) to those expenditures. When the cash in the eating out envelope is gone, you’re done for the month.

If you put all these principles together, you’ll start creating wealth. And as you see progress, you’ll be motivated to continue saving and cutting needless spending. It’s all part of your “fresh start” that bankruptcy gave you.