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Live On a Budget and Still Have a Life

Posted August 15, 2012 in Advice Column, Downtown

According to the American Psychological Association, an estimated 60 percent of illness is directly or indirectly caused by financial stress. Most of that stress comes from over-spending… and most over-spending is caused by two things: not having a plan (budget), and/or not sticking to your plan.  

The first steps
Next month take an inventory of everything you spend (both what and where). Place your spending in to two categories:
• Typical spending. Things you buy or bills you pay most every month (such as groceries, the electric bill, rent or mortgage, etc.)
• Atypical spending. These are items that don’t occur monthly, such as gifts or your vehicle registration.

Then, get a clear picture of how much income you receive each month. If your income varies, determine an average amount you bring in (and rarely go under).

Once you have these two pieces of information, you’re ready to work on a budget.

A good rule of thumb to start with is the 10-10-80 rule, which means you save 10 percent of your net income, give 10 percent and spend 80 percent. Here’s how it works:
    1) Save 10 percent. Skim that 10 percent savings off the top right away. Set up an automatic transfer in to a savings account so you don’t see or think about it — this will dramatically decrease the temptation to under-save and over-spend.
   2) Give 10 percent. Find an organization (or two) you want to donate to and establish a giving commitment with them that equals 10 percent of your net income.
    3) Spend 80 percent. Use a budgeting worksheet to plug in all your monthly expenses (such as utilities, loan payments, etc.), and then determine how you’ll manage the remaining spending money.  Keep in mind you’ll want to account for your “atypical spending” that occurs throughout the year to ensure you’ll have money stored up when those expenses roll around.

Finally, the last two components of any good budgeting plan are to establish a rewards system, and regular review and evaluation.  Set up milestones and rewards along the way — this will help keep you motivated and lessen your feelings of depravation. Also, mark the six-month or one-year anniversary date of your new budget to review your plan to ensure it’s working, and to celebrate the progress you’ve made. You’ll also want to update your budget numbers if your income has increased or you’ve paid off debt (woo-hoo!).

Creating a budget will not only improve your financial future, but will most certainly reduce your stress levels now and in to the future To get started on the right foot, visit our website at to download a free copy of our budgeting worksheet.

Information provided by Debbie Whittie, CEO of Village Credit Union, 601 E. Court Ave., 243-4400.

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