By David Litke, Budget Counselor
Much of our lives is determined by the Jewish and general calendar. Think of the financial aspects of our lives which are either actively or passively associated with the cycles of the year. For example, our food purchases fluctuate in accordance with the Nisan and Tishrei holidays, our clothing needs seesaw with these holidays and the school year and our utility requirements vary with the change of seasons.
We find ourselves now a few weeks after an uplifting month of chagim. Were I to step on the scale at home (which I don’t dare do), I would likely find things out of balance. My weight would be off center and my clothes do certainly feel tighter. A look at our financial situation at this season usually shows a similar circumstance. Our credit card balance has bloomed and debt has piled up. It may take us months to get back on balance (just in time for Pesach?). To add insult to injury, those who use savings to cover holiday costs will have discovered that with low interest rates we can’t cover as much of our expenses as we used to. And for the self-employed, the month of holidays can be even more daunting. Historically, this month sees less income, and the challenge of making ends meet intensifies.
I have written often how vital it is for every family to prepare a written budget before each new month. There is no shortcut to maintaining financial balance without a plan worked out in advance. If we are in debt, this is even truer. Dave Ramsey calls this “giving each shekel a name and address”. By so doing, we guarantee that we will only spend on items and services we plan for. In the case of debt, we naturally have to allocate more to covering our overrun or overdraft, this at the expense of other flexible expenses, such as food and entertainment. This is all eminently doable with guidance and discipline. I have clients who have amazed themselves by their success in eliminating debt and changing habits. You would never head out on the road without a destination and solid idea of how to get there. Financial direction requires the same – a destination and a map to get you there. And the topper is that if you get into good habits, you are far less likely to run into the same financial challenges during the next holiday season.
Here are is a mnemonic to help you remember seven tips for simplifying your budgeting: SHOCKER.
S=SCHEDULE PAYMENTS. Try to schedule your payments in such a way that you don’t slip into a negative balance for even one day of the month. If your salary comes in on the 7th, and your mortgage is due on the 5th (causing you to fall into overdraft for 2 days), see what you can do about changing one of the dates.
H=HORAAT KEVA. Where possible, use automatic bank transfers to pay your fixed bills. This avoids delays and eliminates the forgetfulness which can lead to losing control of the day-to-day smooth management of your home budget.
O=ONLINE BANKING. Get internet smart, so you can check your balance and transactions in your bank as often as you wish. There are no excuses today for being surprised by unexpected charges. Take advantage of the technology.
C=CASH. Pay cash whenever you can. You can’t spend more than the hard cash you hold in your purse.
K=KIDS. Children must also be taught the importance of your budgeting efforts. Your budget will likely include one or more items related to kids’ expenses (cellphone, clothing, entertainment) and the youngsters must be held responsible for staying within the allotted amount.
E=ENVELOPES. When you have set up your monthly budget, prepare cash for all those flexible items that need not be paid by check, credit card or automatic bank transfer. Use one envelope for each cash item, and place the cash into its envelope. As you spend through the month, record on the cash envelope the balance remaining. If you are true to the system, there is no way you will overspend on these budget items.
R=RECORD EXPENSES. Record all purchases in a notebook designated for that purpose. This goes for credit card expenses (though you will later see these on your monthly bill), and most certainly for cash expenses, because the latter will completely disappear from your memory in a short time.
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