A family budget deficit is a frightening experience for any family. Shortfalls are often the result of overspending, credit card debt, and medical bills to name a few. Defeating it takes time and creativity. Have confidence; a family budget deficit does not have to be permanent. Following a budget is all it takes to put that burden to rest.
A first step in beating a deficit is to create a family budget. To start the process, track the previous three months of income and expenses. If you don’t have that data available, track the next three months to get an accurate read of your spending habits. Many major banking institutions have your records on file and can provide them to you at your request.
Average out your income and expenses over the three-month period. This will give you your total average income and total average expenses. Leave out any unusual expenses over that three-month period, major engine repair, or large one-time purchases they can alter the result. Once completed, the bottom two numbers- income and expenses, will show you your true budget deficit.
Take a deep breath- it may look scary. If you have a shortfall, you need to correct it, and fast. Many families do not hold a large enough savings to account for a long-term budget deficit. You first need to start cutting costs. Start at the top of your average expenses and move your way down dividing your expenses two piles – needs and wants.
For example, if you rent, is that monthly expense exorbitant, or are their alternatives to your apartment, condo, or town home? Take a look at your insurance premiums; if you haven’t compared with other providers in the last year, do it, you can save hundreds each year. Increasing your low deductibles can also save a significant amount of money each year. Sometimes, making small changes to a policy can shave twenty-five to fifty dollars a month from your premiums.
Next, look at your utilities, cell phone, cable, and internet expenses. By reducing minutes, canceling movie channels, or decreasing your internet speed you could save one hundred dollars a month or more. If you don’t bundle your internet, cable, and home phone, look into it; you can often get steep discounts by doing this. Your monthly expense may go up after the promotional period, but for now take the discounts and buy yourself time.
Going down the list, if you have a car payment, check with your local dealer to see if you are in an equity position. You may have the opportunity to trade for a cheaper payment. It may sound crazy, but today’s interest rates are at record lows.
Next look at your grocery bill. There are coupon websites everywhere out there that can help lessen your grocery bill if you aren’t currently using them. Sign up for a free email account and appoint it for receiving email updates from your favorite food manufacturers. Each week, you’ll receive a manufacturer’s coupon you can use to double up on with your local grocery store sales events. This alone can save you hundreds each month and thousands each year.
After reviewing your expenses it’s time to have a family discussion to make the necessary adjustments making the logical adjustments. Agree as a family that needs are needs and then fill in your budget with those items. From that day on, buy needs only. Wants are no longer apart of the budget until your crisis is over. Continue to record your family budget each month adjusting as you see fit. You will soon have a surplus and a healthy outlook on family finance.
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