Saving Grace: When Budget Is More Than a Rental

As the stock market goes through gyrations rarely if ever seen before on Wall Street, maybe it's time for investors and bill-payers to rethink that budget first formed when banks didn't have "for sale" signs on them, and "banker's hours" were to be envied, not applied to time spent at the unemployment office.

That free toaster when you opened a new account is toast.

Watching your 401(k)s quickly shrink into 101(k)s should have you rethinking what you can do in the here and now. Lamenting the market is one thing; taking real experience into account is quite another when trying to focus on what to do.

Making and sticking to a household budget can help you conserve cash and limit your credit needs in tough economic times. There are some traps, however, that will bust your budget quickly, despite your best intentions.

It doesn't have to be all misery; get the family together and make a game of it on a Saturday night when you're not going out to a fancy restaurant like you once did. Instead of "Monopoly," think of it as a new millennium game of "Sorry!"

But budget need not be a dirty word just because "recession" is.

The Pennsylvania Institute of Certified Public Accountants offers advice to avoid making mistakes when it's your turn at making a budget, of which the top five are listed here.

· Not Having a Budget: To create one, add up the amount of net salary and other money you expect to receive during the month, and then total what you need to spend on necessities, such as rent or mortgage, food, transportation, entertainment and other costs. Once you subtract your expenses from your income, you can save or spend whatever remains however you like. Just remember do not spend more than what is left. If you do, you'll have to borrow from next month's budget to cover the overage, setting you back in the future.

· Overuse of Debit or Credit Cards: One quick way to outspend your budget is to whip out your debit or charge card when you want to buy something you can't afford. If you can't resist the temptation to use these cards, then leave them at home. Resolve to use only cash for your purchases, which will force you to live within your means. Once you've used this approach for a month, it will be easier to make a habit of it.

· Neglecting Those Rainy-Day Funds: Even if you live on a tight budget, try to set aside as much as possible into a special savings account that will act as a financial safety net. You'll be happy to have this cushion if you face a large unexpected expense or if you lose your job. After your savings have grown a bit, you can dip into the account for special indulgences or luxury items. The best way to succeed with your savings account is by making regular payments over time. You don't have to save a lot each week, but make sure you stick to your plan.

· Ignoring the Small Expenses: How much does your morning cappuccino cost? Do you buy a bottle of water when you go to the gym? Do you purchase your lunch every day at work? These are unnecessary expenditures that can be costly once added up. Because they are not regular monthly costs — like an auto loan, for example — you may forget to include them when budgeting your expenses. However, these items drain cash quickly. As you go through your day, take note of all your small expenditures and consider how they could be avoided. This may include bringing your lunch or setting aside time to shop for a week's worth of homemade dinners in advance. You will notice an immediate improvement in your budget.

· Stamping Out Fun: It's true that renting a movie is cheaper than going to a theater, and eating at home is less expensive than a restaurant. But be careful not to outlaw outings and entertainment altogether. If you do, you'll make yourself so miserable that you give up on your good budget habits. Instead, stick to your thrifty intentions most of the time, but try to plan for some special outings or purchases when possible.

And it may very well be easier to do so these days. Check local restaurants for special deals; the "early bird" has suddenly turned into the humming bird as a number of eateries have discovered their kitchens aren't humming as they once did with outlandishly priced items, and are now offering special "deals" or discounts to attract the hungry saver.

Airlines, too, have reportedly dropped their prices for the long trek to Europe and/or Israel — of course, that does not mean Europe has given up on the euro, which is still strong against the dollar once you get there.

Which is to say that elaborate vacations of the past should be rethought. A recent article in a national publication discussed how those who once flew off to remote exotic — and expensive — destinations at the drop of a hat are now looking for cheaper hats.


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