- 1). List all of your monthly bills in order from largest to smallest. This includes items such as mortgage or rent, property taxes, home insurance, car insurance, car payments, utilities, home phone and cell phone, grocery shopping and miscellaneous expenses. If you have credit card or educational loan payments list these as well.
- 2). Look to see if any necessary items can be reduced. Housing, food, utilities, credit card and loan payments are examples of items that you must pay each month. Sometimes these can be reduced by lowering usage or interest rates. For example, if you have a mortgage at a higher interest rate than what the market is bearing, determine if you are in a position to refinance to a lower rate. If you have credit card payments, call the company to see if they will reduce your interest rate. If you typically spend $800 a month at the grocery store, reduce your budget as much as possible. Keep track of the amount of money you have reduced your budget by on the paper.
- 3). Check the non-necessary expenses to see if these services can be reduced or eliminated. For example, if you have premium cable channels, you can scale back to basic cable, or no cable at all. There may be some expenses that you do not necessarily need to survive, but make your life more pleasant, or allow you to engage with others. Examples of such items are the internet and cell phones. If you have not curbed your budget enough, then they will have to be eliminated, otherwise you can keep them in your budget. Between the necessary and non-necessary expenses total how much you have saved.
- 4). Eliminate credit card spending except for emergencies. According to financial expert Dave Ramsay, McDonald's once conducted a study to see if they should use credit cards in their restaurants. The study found that people spent 47 percent more in the restaurant when using a credit card. Eliminate the use of your cards unless you have a true emergency such as a water heater failing, or a major car repair.
- 5). Pay cash for every single thing you purchase. Spending cash allows people to physically see the money leaving their wallet. This keeps them in tune with how much they are spending as they watch their wallet lighten and their savings account shrink. You will find that you are much less likely to make those small purchases such as the cup of afternoon coffee, or snacks at a gas station.
- 6). Find other ways to entertain yourself while spending little to no money. People are used to going to a movie and dinner on the weekends. This can cost upwards of $200 for a family of four. Instead, find activities that are similar that you can do at home. For instance, rent a movie from the library for free and make pizza at home with the family. Other activities such as going to state parks, playing sports on town recreational fields and playing board games or video games (if you already have the unit) cost little to no money.
- 7). Revise your budget as needed going forward. It may take several months to really refine your budget to exactly what you need. You might find that without your favorite premium cable channel you are missing your favorite show. You can place that item back in the budget, but you will have to remove it from somewhere else. Also, keep track of the amount of money you save each month with your budget. Before long, it will feel refreshing to be actually saving money instead of spending it.
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