Treat Your Household like a Business

Oh my, another bill and no money left over? Maybe if I put an unsigned check in this bill, they will believe that I forgot to sign it; then I can get an extra month float? Guess I'll have to put this one on my Visa again. Does this sound like you? Are you trying to find out how you can get around this pay check to pay check living? Have you ever wondered how you got into this mess? Many have gone down a road like this at least once. However, there are also those who have managed not to. The difference is they had discipline. What ever happened to discipline? It must have gone out in style with bell bottoms because today there seems to be a lack of discipline everywhere. Those that are in the mess with the credit cards might find that there are other areas in their life that lack discipline. It's an emotional trait that we need to get back in order to move ahead financially.

One thing I have always done is treat my household like a business in the sense of knowing where our money goes throughout the year. From monthly to yearly, I know where my expenses are going and what my returns are on my investments. I will even do a yearly net worth to see how we are doing. A net worth is when you take your assets minus your expense/liabilities and what is left over is your total equity. If you treated your household like a business, you'd be surprised how it feels to have discipline back in your life. Here are some tips on how you can manage your household and stay disciplined.

Prepare a Budget

I know you don't like the 'B' word. However, the purpose of a budget is to keep you on track in understanding your cash flow and to know where the bulk of your expenses are going towards. Many people who use the credit card without understanding their spending habits are the ones who end up living by pay check to pay check. It's not that they don't have enough income, it's because they have a lot of charging going on. When you prepare a budget, estimate the non-fixed expenses on the higher end like your utilities, food, gas, etc. so you aren't caught short. If there is nothing left over after that, then you might need to come up with some alternatives to increase your income or decrease your expenses.

How to Increase your Income?

Outside of getting another job, you can take advantage of only paying what you must pay in taxes by re-examining your withholdings. Every year you should re-calculate your W-4 or whenever there are changes in income, jobs, marital status, or dependents. Many people prefer to get a refund on their taxes by taking less withholdings. However, why wouldn't you prefer taking your money now and help your cash flow. By the time that yearly refund comes, you could be helping to pay off some credit card interest or at least make it a little easier on yourself. Why contribute it to Uncle Sam's fund so he can enjoy the interest? You should accrue that interest.

It's good to take advantage of a 401k especially when your employer matches a percentage of your contribution. However, if you can't afford that, don't be working on contributing to your retirement when you are in a tight situation now? Work on the present situation first.

Reduce Expenses

Look into utility programs that might be offered to save on your monthly bills. Where I live, our utility company will give us a credit over the summer if you allow them to put you on a program that allows them to regulate your air conditioning during peak times. It could be a savings up to $13 a month. Remember every way you think of cutting back on expenses adds up.

Reduce your electric bill by putting a timer on your hot water heater, changing all light bulbs to fluorescent lighting, and caulking windows and doors for any air that might be leaking into the house. These ideas alone could save you 40% or more off your electric bill.

Do you have a high usage rate on your water utility? Where I live, we have a very high usage rate over a certain amount of gallons of water. Therefore, we have conserved water by xeriscaping some of the lawn and using rain barrels to water plants.

Do you really need a newspaper? I get all my news from the Internet or the tv. If you are getting a newspaper for the adds or coupons, you can easily get it online. That alone can save you $20-$30 per month.

Review your insurance. You should always take the highest deductible when it comes to your car or home. Let's face it. If you put in a claim for any accident or occurrence, they are going to raise your rate. If you put too many claims in, they may drop your policy. Take those monthly savings and put it in an account for emergencies. You will most likely save that deductible amount in no time. By keeping a good driver's record you can reduce your premiums up to 25%. If any of your children who are driving have a B average in school, you should get a discount. Make sure you are shopping around yearly for better rates. Insurance companies could have special incentives for good drivers.

When it comes to life insurance, the best and cheapest way to go is with term insurance.

Know your company benefits. Some companies might have a special tax defer programs with medical expenses. This is something where you estimate a certain amount of medical outlay expenses each year that is taken out of your pay check, and you don't get taxed on it. However, if you estimate too high and don't use it, then you lose it.

Think about not having a land line phone and just use your cell phone. I have been doing this for 2 years now, and I'm saving about $40 per month because I have eliminated the one phone bill. I was paying more in extra fees and taxes on my land line that I did not have with a cell phone.

Plan your meals out in advance. Then make a list when you go to the grocery store. Try to stick with that list. This will give you control on your spending. If you find yourself about to grab something not on the list, ask yourself if you really want it. You want to keep the emotions out of eating. For further assistance, read my article on "Tips for Becoming a Smart Grocery Shopper".

If someone owes you money, or if you are due a refund from a company, treat it like an account receivable clerk. Go after it! Use a calendar and mark down the last time you asked for it. If they are telling you it is coming in on a certain date, then remind yourself to follow through to call again. Don't give up. Always go after what is due to you. Hey, if it is a friend or relative who you loaned money and they were suppose to pay it back by now, don't feel uneasy about asking for it. If they knew it was a loan and don't have the sense in respecting their agreement, they could be manipulating you.

Too many people are just winging it today without a plan. In order to know where you are going, you have to know where you are. And let's face it; it takes money to make money. Have a one year and five year plan. Keep tweaking things along the way. Remember, it's never too late to turn it around and get disciplined. Our parents or our grandparents had discipline because they knew what hardships were like growing up through the Great Depression. They weren't called the "Greatest Generation" for nothing.

The bottom line is that it is not what you make, but how much you keep that is important.