Make sure the list of fixed expenses includes a payment to yourself. Payroll deductions and/or deposits can simplify the process. Most of us are less likely to spend money we don't see. Having money set aside for special purchases, big-ticket items or emergencies is like a security blanket.
-- Pay fixed expenses first.
-- Balance flexible spending. Flexible spending usually includes some necessities, like food, because consumers can choose between eating a casserole or soup at home or dining out. Clothing usually is considered a flexible expense because the quantity and type of clothing varies. A consumer also can make the decision to put off the purchase of a new winter coat until the price is reduced, or choose to spend less on clothing to save for a newer car or a vacation.
-- Learn to identify the difference between needs (essentials) and wants (extras), It's a good idea to keep a running list of both. Successful money managers usually are able to manage both needs and wants, particularly when they shop with a list and resist impulse purchases.
-- Give each family member an allowance. Setting aside a fixed amount for personal spending usually covers some needs and some wants or small luxuries. Allowances need not be reserved for children. While they can be good teaching tools for children, adults also can learn to balance wants and needs and, at the same time, set a good example for their children.
-- Keep track of miscellaneous expenses. Spending a dollar a day in a vending machine at work may not seem like much, but if you multiply a dollar times five (for each day of the week) times 52 weeks, it adds up to $260 a year.
-- Comparison shop. Check prices, product guarantees and service at two or more places when purchasing costly items, such as a major appliance or a car.
-- Use credit with care. Charging some items such as car repairs can allow a customer to see if the repair is successful before the bill arrives. It's best, however, to limit credit card purchases to an amount that can be comfortably paid within a given time frame. People often spend more when using credit rather than cash or a check. Try to avoid using credit to pay for purchases as common as groceries that would normally be paid for with cash or a check. Using a credit card for such purchases, however, is fine if you always pay the total balance and don't accrue interest charges. It is important to keep track of credit card expenditures to minimize surprises when the bill arrives. Carry an index card or small notebook to keep a running total of credit card expenditures if you have difficulty managing credit.
-- Buy now, pay later?
Postponing payments or interest rarely is a good idea. Payments still will need to be made, perhaps even when a product is no longer useful.
Lynn F. Little is a family and consumer sciences educator with University of Maryland Cooperative Extension in Washington County.