Earning money is great, but spending it properly is even more important.
If you pull in the big bucks and just spend it all recklessly, you’re risking walking down a very dangerous path.
Budgeting your money, no matter how much or how little you have, is one of the most important skills you can learn.
Below are a few sage tips from various financial experts to help you get started.
By listening to their words and applying their wisdom properly, you can survive and thrive on even the most meager of salaries.
Suze Orman: A 10% Cut in Family Spending
Financial guru Suze Orman suggests cutting your family spending (or just plain fun spending, for those without a family) by 10% every month.
It’s just enough of a cut that you’ll start to see savings pile up quickly, thereby making it easier to pay back debts and cover actual, important expenses.
However, it’s not enough of a cut that you’ll feel like you’re depriving your loved ones of anything.
Let’s face it — if you’re used to spending $100 on movies and gaming every month, trimming that amount down to $90 a month isn’t going to cause mass wailing and angst.
Everybody will still have fun, including your wallet.
Dave Ramsey: Overbudget for Groceries
The ever-animated Dave Ramsey knows why you budget and save, save and budget, and yet still end up broke every month —you forgot the food.
According to Ramsey, when people put together their monthly budget, a lot of them don’t consider their grocery bill at all.
And if they do, they severely underbudget, so even though they may think they’re putting $100 aside every month, $80 of that is actually going to num-nums they forgot to calculate.
So next time you go grocery shopping, hold onto your receipts, and add them all up at the end of the month (this includes times you ate out, because even though Burger King can barely be considered food, it still technically is.)
Whatever that amount if, add $50 to the total, just in case.
There’s your real grocery budget, and if you go under, great. That’s always preferable to going over.
Ric Edelman: Look to the Past for Inspiration
Ric Edelman wants you to go back in time when forming your budget. Not too far back, obviously — your bills in 1995 aren’t going to be anywhere bear what they are today, after all.
But looking back a year? That’s totally doable.
Find your bill history from the previous calendar year and add ’em up.
If you can find any receipts from extracurricular activities, like the movies or dining out, add them to the final tally.
This should give you a real good idea of what this year’s expenses will be as well, and you can budget accordingly.
Obviously, if anything huge has changed in the past year (new house with a higher mortgage, new car, septuplets), then adjust for that.
But if your life has stayed largely the same since a couple Christmases ago, then this is a fine way to prep for the present.
Gail Vaz-Oxlade: “Magic” Spending Jars
Tough-talking Gail Vaz-Oxlade understands that many people can’t help themselves form spending too much on expendables, and she thinks it’s because they don’t physically see the money.
It’s all too easy to just swipe the card, be done with it, enjoy the fun, and get smacked in the face with big bills and overdraft charges later on.
Her solution? “Magic Jars.”
After you budget for your fixed expenses and important variables (such as debt repayment, gas, and food), take money set aside for entertainment, clothing, dining out, travel, and other similar ventures, and stick it in a jar.
Spend only the jar money when partaking in these fun fests (no cards allowed,) and you’ll no longer find yourself surprised by sudden brokeness because you just had to get ten toppings on your extra-large pizza.
Mary Hiers is a personal finance writer who helps people earn more and spend less.