Budget Planning 101 - stage 2

Eliminate excess expenses


You should already be tracking your current spending using the tips from Budget Planning 101 - stage 1

Shortly after starting stage 1 we can begin stage 2, which is to eliminate excess expenses. Stage 1 should have pointed out at least some problem areas with finance charges and other recurring fees. If you are serious about cutting costs and sticking to a budget, you must take control of this area first and foremost.
Work to reduce or eliminate finance charges and late fees. The latter is the easiest to do. If you can set up online bill payment with your bank, this makes it very easy to schedule payments at a convenient time of the month for you. Once this is set up you will worry much less about bills being late. If you are uncomfortable or unable to schedule online bill payment, try to stick with a regular schedule for bill payments. You should be able to sit down every other week and take care of anything due before the next session. Working out a schedule in this manner makes it much less stressful as you will have a set time to deal with payments, and being on top of due dates will reduce daily stress of worrying about what may be due today or tomorrow.
Finance charges will be a bit more work to reduce but it is not difficult to do so. You may have heard that you can simply call your credit card company and ask for a reduced percentage rate. This is still true and only requires the effort on your part to make the call. Remember that the banking industry is highly competitive and if they will not reduce your rate, be sure to tell them you are looking to transfer your balance to another bank for a lower rate. There are plenty of offers out there and consolidation of some accounts while you are at it may also be in order for you if you have too many. This will reduce the amount of payments you need to make, which adds up to less stress and less of a chance to miss or be late with a payment. Take the time and effort to move to financial institutions that work better for you.
Other expenses can be easily eliminated too. You do not have to cut out all the fun from you life however. Some of the easier cost cutting ideas are also good for your conscious and the environment. Research eco-friendly ideas for reducing electricity and gas usage.

For more ideas, you can also use the cost cutting tips listed in budget basics page of Budget Planner.

Budget Planning 101 - stage 1

Establish your current spending


This is the first stage of our 5 step series to begin your budget process. Stage 1 is to establish your current spending.

If you already have a spreadsheet program this is your best choice, as it allows for easy calculations. All you really need is a pen and some paper at the very least to get you started on identifying and tracking these fees.

Organization is a large part of this budgeting process, so I recommend you consolidate how you handle your bills and expense tracking. By this I mean, you either have online banking and account management for your accounts, or you collect your monthly paper bills and organize them manually. I am a fan of the online method, but please choose whichever you are comfortable with and organize accordingly.
So now to begin. Once you have a month or two worth of bills, begin to track actual spending categories, such as

utilities

gasoline

car repair/maintenance

entertainment

groceries

dining out

pet expenses

other household

These will be whatever categories make sense for your life. Then let's add these pesky little categories that may not come to mind at first, such as

late fees

finance charges

atm / checking fees

annual or regular membership fees

Once you see the expenses in these categories start to add up, this will provide some great motivation to keep your budgeting process moving along. It is a good idea to track all of your expenses going forward in this manner, but to provide a good snapshot of your spending habits, you should have at least 2-3 months worth of this data.

In stage 2 of Budget Planning 101 we will access our new baseline and work toward eliminating excess expenses.