Tuesday Tip: Make a Budget to Avoid Overspending

By Yehudit Garmaise

Only by keeping a budget can consumers regularly spend less money than they bring in. While many people’s savings strategies can be irregular at best, setting aside some funds for savings is an essential part of any budget.

“We need to save to plan for future unexpected and expected expenses, such as tuition, Simchas, and retirement,” he said.

Consider the following tips to create a budget and stick to it.

1.      First, take some time to sit down and make a list of all non-negotiable expenses, such as rent, utilities, groceries, gas, car payments, medical care, tuition, phone bills, tzedakah, cleaning help, clothing, gifts, car services, food and drinks bought on-the-go, shul dues, and any other expenses, such as dry-cleaning, upcoming Yom Tov or seasonal expenses, home repairs, and travel.

“If you don't spend a few minutes thinking about where your money must go, you will likely spend it on many things that aren't that important to you,” he said. “We want to easily make our monthly expenses while always putting aside some savings for emergencies and the future.”

2.      In your list of essential expenses, always include savings, which should be 10% of one’s income.

"While any savings account is good, the best way to save big money for the future is to invest in an index fund that includes compounding interest," says Suze Ormond, a personal finance expert who wrote the best-selling Nine Steps to Financial Freedom. "If a 25-year-old puts $100 a month into a Standard & Poor’s 500 index fund through a Roth IRA every month for 12 months, every year for 40 years, by age 65, that person will have $1 million."

 3.      After subtracting essential expenses and some savings from one’s income, budgeters can determine how much leftover they have to spend on non-essentials each week.

 Among the unnecessary expenses, “many people waste money on,” according to billionaire Warren Buffet, are paying high-interest rates on credit card bills, smoking, expensive personal care products, unused and unnecessary subscriptions, expensive car payments, and “chasing the latest technology.”

According to Buffet, what people should most prioritize spending money on is advancing and developing one’s professional education.

“The best investment one can make is in oneself,” said Buffet. “Enhancing skills and education can boost earning potential significantly. Knowledge and abilities are assets no one can take away from you.”

4. After determining the amount of leftover “spending money” budgeters have each week, they can take out that pre-determined amount of cash and use only that cash to pay for things such as take-out coffee and other small purchases.

5.      Cash is better because most people overspend with credit cards. People who use credit cards to accrue points and rewards should try to only use their cards for regular purchases, such as groceries, bills, gas, and occasional airplane tickets. Otherwise, all the little things we charge weekly add up to unexpectedly large bills at the end of each month.

6. Budgeters must be honest with themselves When assessing spending money or non-essential expenses. For instance, how much a month really goes to take-out meals and snacks, Amazon purchases, car services, and other impulse purchases.

7.      The biggest mistake people make when making budgets? Not having one, many experts say.

 “Sitting down, writing out a budget, and figuring in the need for savings is half the battle in regularly meeting all of one’s expenses and saving for emergencies,” a finance professor shares.

 8. People who worry they won’t stick to their budget should post their printed-out budget prominently near their desks so they are constantly aware of it.

 To reinforce good budgetary habits, people who stay within their budgets while saving 10% of their incomes each week can reward themselves with something fun and small, such as a pizza dinner for the family or a delicious coffee out.