There are only two ways to balance one’s budget or, even better, to make it possible to add to one’s savings each month. They are: Increase your income or to cut your expenses.
If you are paid by the hour you might be able to work more hours, and if you are in sales, you can work harder to increase your sales commissions and earnings. If you are salaried, however, unless you take an extra job, you will probably have to wait for a bonus or salary increase. And if you are retired, you are most likely on a fixed income. Should your expenses increase, you will be truly challenged in balancing the budget.
Too often, I go over people’s expenses to see how they can reduce them, hopefully freeing up extra dollars for simple living expenses. Here is the 15-step protocol that I use:
1) If you are a homeowner with a mortgage, check with an honest mortgage banker to see if a refinance is a good option to reduce your monthly mortgage payments. Before you sign on the dotted line, check with your lawyer and accountant to review the new terms of agreement.
If you are retired and have substantial equity in your home, you can explore a reverse mortgage, which may allow you to stay in your home for as long as possible. The fees are generally very high, and it is often a last resort option. You must carefully explore such a transaction with a qualified financial counselor or your attorney before entering into it.
2) Review your car and home insurances to see if you are getting the best possible rates. Review your health insurances or dental plans every year, as you can often save serious dollars for the exact same coverage by shopping for a better deal. Make sure you are comparing apples with apples, as plan benefits differ.
3) Pay off credit card debt, or transfer balances to a zero-percent-interest card. Paying high credit card interest takes a real bite out of your income and threatens your financial well being. If you are in heavy debt and unable to keep up with the payments, seek advice from a good financial planner, attorney, or accountant.
4) Drop the thermostat one or two degrees in the winter, and raise the thermostat in the summer. Check with BGE about any energy assistance you are eligible for. Check all benefits you may be entitled in food and other social services.
5) Drop your telephone landline, and use your cell phone, shopping for the best plan for your telephone usage pattern.
6) Negotiate your monthly internet and cable fees. It’s a competitive environment, and you would be surprised at what you can save if you just ask for a better deal.
7) Be a better food shopper: Use sales and coupons to reduce your food costs, but buy responsibly and intelligently to avoid waste. Buy only those items you use, and be conscious of perishability and “best used by” dates.
Be aware, also, that purchasing prepared foods drives up your food costs and that home prepared foods are generally healthier, possibly tastier, and certainly more cost effective.
8) If you have large medication bills, check with your doctors about whether generic and less expensive, alternative drugs would be an option for you. Check the price of your medications at a few pharmacies. In addition, chaeck if the drug company has special programs to reduce the costs.
9) Use community resources like Mesila or other credit counseling to help you put your finances in order.
10) Go through all your expenses and see how you can shave a little here and a little there. You would be surprised how small expenditures add up.
11) Avoid borrowing money that you will be unable to repay. If you cannot pay your monthly credit card balance, avoid using the card as a financial crutch; it will eventually destroy your credit.
12) Most important for married couples: Make sure you are communicating and working closely with your spouse to ensure financial stability. Too often, couples are not working together in planning and budgeting for the family needs.
13) Try hard to put aside a few dollars whenever possible, as savings for financial emergencies that will certainly come up. Create a rainy-day fund as your back up to financial challenges.
14) Keep the home and your property in good shape, as they are likely the most valuable asset you will have in your life. Engage an honest and trustworthy mechanic to take preventative care of your car. You will hopefully avoid unnecessary repairs and cut expenses in the long run. Note the difference in gas prices all along Reisterstown Road, which can vary by 10 to 15 cents per gallon. Be an informed consumer. The pennies add up!
15) Teach your children financial responsibility and make sure they learn financial skills that will, i”y, serve them and their future families one day.
If you go through this financial exercise on a regular and consistent basis and stay on top of your financial well being, you will be rewarded by improved overall financial stability. Remember, parnassa is a bracha, so Daven always for your family and friends, and may we all be rewarded with a shana tova of good health, much happiness, and good parnassa.