Edward Jones Diversity Series

This Edition: "Budget Reduction 101"

by Edward Jones, IMDiversity Featured Employer

Assessing your budget may not be the most glamorous item on your to-do list, but evaluating your spending habits regularly can help to keep your finances sparkling.  A few adjustments now can make all the difference in reaching your financial goals later. 

Begin your journey by evaluating your fixed expenses, move on to discretionary costs and sail toward financial freedom.

1. Check your fixed expenses.  Just because they are “fixed” does not mean you cannot adjust them.  Every budget item needs a thorough once-over from time to time.
2. Insurance premiums can vary depending on coverage.  Ask your insurance representative about current rates, and consider increasing deductibles on your automobile or homeowner’s polices to save money. 
3. Utility costs can be decreased.  Turn down the heat in cooler months, and cut back on air conditioning in warmer months.  Use room or ceiling fans to compensate.  Also, review your telephone needs.  Are you paying for features you do not use or extra lines you do not need?  This includes reviewing your cellular phone options.  Look at ways to reduce costs by eliminating options or how often you use your cell phone.
4. Rent or mortgage payments could create hidden fat in your budget.   Can you afford your current domicile?  If your payments account for more than 25% of your income, begin the process of evaluating how to reduce this ratio.  Consider moving to a more affordable home.
5. Clothing can derail a budget if you shop without a strategy.  Most clothing purchases are impulsive, so make a list of what items you need before venturing into your favorite store.  Purchase the best items you can afford, and make sure they are items you truly need.
6. Groceries can eat up a budget.  Check store brands vs. name brands for value, and think about passing on prepared foods and opting for often less expensive, fresh meals.
7. Transportation costs can ride a budget into the ground.  Evaluate ways to save money by carpooling or walking if your destination is close.  Consider keeping your current vehicle two or three years longer than you normally would.  Negotiate the lowest airfares possible.
8. Credit cards can put a major strain on your budget.  Most people can easily improve in this area.  Pay off the credit cards you have.  Using cash for purchases helps you decide between a “must have” and an impulse.

Discretionary expenses are ones that do not have to be completely eliminated.  After all, you want to have some fun, too.  However, having fun and enjoying the finer things in should not break your budget.  Before your next vacation or new furniture purchase, research all your options to find the best deal while meeting your needs. 

Take a peek at discretionary expenses that are pure luxuries, such as your morning latte or lunch at your favorite bistro.  Do not deny yourself your morning jolt of java or a relaxing time away from the office, but bring your coffee from home or brown-bag it a few days a week.  Perhaps you could put the money you would have spent on those luxuries right into the bank.  You can even create a special account for it and start saving for a major purchase such as a vacation or furniture.  On the other hand, you could slip it into your 401(k) and let it start working for you.

Evaluating your budget does not have to be a dreaded chore.  If you keep in mind your financial goals and have the willingness to stick to it, the rewards can be great.  Taking control of your finances empowers you and keeps you focused on the future.

Use some of the money you save to help fund a retirement nest egg.  Consider contacting an investment professional, such as the investment representatives at Edward Jones, for assistance. Edward Jones is online at www.edwardjones.com and around the corner in your neighborhood.

View articles from previous editions in the complete Edward Jones Diversity Series Archives

Featured Employer Edward Jones is a Key Sponsor of IMDiversity.com.

IMDiversity.com is committed to presenting diverse points of view. However, the viewpoint expressed in this article is the opinion of the author and is not necessarily the viewpoint of the owners or employees at IMD.