Finding Freedom: Managing Your Expenses

After seeing all your your expenses and beginning the early stages of your budget, now is the time to decide what is your goal? I write my goal at the end of every cash flow plan, so I know where I am going.

Here is the list of categories to my original Cash Flow Plan. Since making my first one, I have eliminated some categories, because we just don't need them anymore. The asterick stands for the non-negotioable items. There is nothing that you can do to change these, generally. My only suggestion is to pay minimum payments on these, do not pay any extra (for now). That extra can go towards your snowball.

1. Medical/Health

• Doctor Bills. Any current bills that are due. *
• Office Visits. I set this amount bi-weekly when I pay my bills.*
• Medicines. Any that we fill on a monthly basis.*

2. Personal

• School Meals. Breakfast(if needed, Lunch, Snack Milk)
• Any organization fees such as Unions or Clubs.*
• Blow.
• Hair Cuts.
• Clothing.
• Entertainment.

3. Charitable Gifts. Even when paying down your debt, it is still a good idea to give. Our money is actaully His money, He has just entrusted us with it.

4. Savings.

• Emergency Fund. I believe that it is essential that you have atleast $1000 in the bank before paying any extra on your bills. This is a Dave Ramsey "rule" and it has saved us more times than I care to count. Things are going to happen, no matter what you do. You might as well have a small cushion to absorb these things so you don't blow your budget, and end up frustrated. However, it is just that, an emergency fund. Not a "I need a new toy fund." So, try to put some money aside into a seperate account for your emergency fund before paying rolling your snowball. Then, if you need to use it, put it back into your cash flow plan to repay.
• Christmas Club. This has been such a lifesaver for us. As I have mentioned before we put a small amount per paycheck (automatically drafted) into a Christmas Club account. We set aside enough for Christmas gifts, as well as our real estate/personal property taxes and my husband's annual trip since they all fall at the end of the year. This way we aren't trying to scrounge money together when it comes up. Also, we get interest, so it is free money!

5. Housing.

• Mortgage payment(s)/Rent *
• Home/Renters Insurance. *

6. Transportation.

• Vehicle Payment (s). *
• Vehicle Insurance. *
• Gas.

7. Utilities.

• Electric. *
• Cell Phones/Landline.
• Cable/Satellite.

8. Food.

• Groceries.
• Eating Out.

9. Debts.

• Credit Card(s). *
• Personal Loans. *
• Student Loans. *

Total up all of the categories. Next to each item I write the amount, and at the bottom of each category I total it all up and circle that amount. Then I go back and add up all the circled amounts, and write that at the bottom. Next to the final tally, I write my income. If your income is less than your outgoing go back and shave some off of the negotaibles. If your income is more than your outgoing, jump up and dance! Then, add a number 10 to your list.

10. Snowball. This is my favorite part!!! Your income and your outgo should be the exact same number, every month. Do not let any money be unassigned, you are setting yourself up for failure. The only way of knowing exactly where your money is going, is by you telling it where to go. So do it! :) If you end up eliminating a debt or a bill, that goes here.

Shaving the negotiable spending:

• School Meals. This area always fluctuates for us. If I know we are tight, I make sure that the kids eat breakfast before they leave. Also, it changes if one of the kids decides to pack a lunch.
• Blow: Every budget needs this category. It is absolutely essential. Even if you can only allote $5, do it! If you do not have an allowance to spend how you please, you are setting your budget up for failure. My husband and I each get our own set of "blow", because we have different wants. We've pooled it together to eat out before, though! Hey, we really wanted to eat out and the Dining category was empty! This is also a must for cash!
• Haircuts. If there are boys in the house, I view it as negotioable. I know some will disgaree. My thinking though, is if you really need to pinch, you could always cut a boys hair at home.
• Clothing. You never know when you or your children will need new clothes, so it is always a good idea to set some money aside to avoid a budget buster. It is negotiable, because it can be done away with. We currently do not have any going into this category, because I just bought new clothes for the kids. I will start it back up when summer hits, so I will have it set aside for new school clothes.
• Gas. For some families this is negotiable. Track how much you are driving and using in gas, and see if there is any way possible that you can cut it down. Could you go grocery shopping once a week instead of going multiple times?
• Cable/Satellite: I know that there will be people that diagree with me here, but it really is. I'm not saying to cut it out completely, or to cut off all of your favorite channells, but I rate this pretty high on the "getting cut" list. We cut our satellite down to the bare minimum pack that they offer and we removed the locals because it was $5 extra a month. We can get those babies for free! I highly suggest atleast thinking about going lower in this area, but you really should talk this over with your spouse(if you have one) so that there is an understanding. If nothing else, you can always lower it and see how you like it, if it isn't working, bump it back up. But, you should atleast consider it for a bit to get your snowball going.
• Cell Phone and Landline: Do you really need it? How much do you really use it? Enough to justify your bill? What about prepaid, would that work for your cell phone needs? I personally wouldn't drop my landline all together, but some may. If you've thought of dropping it, maybe now is the time so you can get your snowball rolling. Also, look over your bill with a fine tooth comb. Do you have a bundle pack? Sometimes these are not cheaper. Also, what about added calling features? Would you be willing to drop Caller ID, Call Waiting, VoiceMail? (Most cell phone plans already include these, so it may not make a difference there) My suggestion is to call your phone company and talk out your options. Get prices for everything and weigh it yourself. Do not just take their word for it, they are there to sell you. Period.
• Entertainment/Dining out: Maybe instead of going out for a movie, rent one in instead. Eat a nice dinner at home instead of eating out. Play games at home. If this is an area that you are wanting to cut back in, I would start by looking at exactly what are you spending money on in this area. If you eat out more than once a week, cut it down to just once. Even cutting out a little bit a week, will make a big difference in your main totals. Definitely make this a cash category. I say this so that you know for sure where it is going. It is so hard to track this category if you use debit/checks.
• Groceries: This is a much more complex topic than the others, and honestly deserves it's own post. But for now, my one strong point here is CASH!! We cut our budget (before coupons) by $200 month, just by using cash and having a list. Sticking to the list and tracking what you put in your cart in conjuntion with cash will save you a ton. When I first started cash, I had to keep my debit card and checks outside or at home. Knowing that I had a back up plan got me everytime. Not only does it hurt to hand that money over, but you do not want to go over with your cash (uh, embarassment!!) so you will pay close attention to what you are doing. Even if you are a skeptic, atleast try it once for me, okay? :)

We make a new Cash Flow plan every month to couple of months. I do this in my budget notebook so that I can go back and see where we have been. This also comes in handy for unpredictable incomes, because you can average the last couple of months of income using your cash flow plan. It will take some practice to get your numbers where they work for you, but once you do, it will be so easy.

I know that was a lot to take in! Your Cash Flow plan is one of your best tools in eliminating your debt, and acheiving your financial goals. I like having the constant reminder of what I'm doing so that I don't lose track and fall off course.

Over the weekend, I encourage you to make your Cash Flow Plan, making sure that the bottom line is ZERO. Take a look at your non-negotiables. Is there anyway that you can cut them? Be creative, and see how low you an make those numbers so that you can grow your snowball.

Come back Monday and let us all know how you did. We are all in this together! :)

P.S. If you have a question or need any help, feel free to shoot me an email!