Find out how to spring clean your finances

Beth Rumsey, Staff Writer

Springtime is a good chance to clean out the clutter that has collected in the closet during the past year. With the current uncertain economy and job situation, not to mention the cost of living increasing, now is also the time to “spring clean” the finances and clear out any expenses that are taking up space, as well as dollars, in the family budget.

According to Debby Black, Family Nutrition Assistant at the Ripley County Purdue Extension in Osgood, the place to begin is to find out where the money is going. Write down everything that is purchased, and keep the receipts, for at least three months. Each week, break down the spending into categories, such as food, clothing, utilities, rent/mortgage payment, and miscellaneous.

“Ideally, one would track their spending for a year,” said Black. This would help to make a more realistic budget. “It’s difficult to make a budget if you don’t know where the money is going,” she said.

After tracking spending, determine what purchases could be reduced or eliminated from your spending. For example, is there a way to reduce the cost of your daily coffee or soda? Is there a way to reduce the utility or grocery bills? Do you really need to spend those extra dollars every month for channels that the family does not watch?

The grocery bill can be reduced by planning meals ahead of time; taking advantage of sales or buying in bulk. Savings on utility bills can be made by requesting the “budget plan” when available; by opting for a lower cost phone plan or even eliminating unused features.

Knowing the difference between a ‘want’ and a ‘need’ is also important, according to Black. Every family is unique and each will have different financial priorities. The goal is to spend your dollars more efficiently.

After looking at the spending patterns of the family, then determine a start date for your new budget. This can be any time such as January 1; fiscal year; or just the time you are ready.

Your budget does not need to be complicated, according to Black. Every person’s budget is different. It can be customized to reflect the needs of the family. There are three main areas that the budget should include: income, expenses, and everyday savings.

The income portion will include any money coming in from jobs, sale of items, or extra work performed with payment. Expenses will include fixed utilities, car payment, mortgage, or insurance as well as variable groceries, credit card, or clothing.

The everyday savings should include those payments not made on a monthly basis such as property taxes once a year; car insurance paid every six months; or vehicle tags. For those periodic bills, Black advises breaking down the cost per month and saving that amount each month.

According to Black, it is important to have at least six months worth of income in the savings account in case of job loss or sickness that prevents one from working. But, how does a family living paycheck to paycheck, often with very little left over, put away for a rainy day?

“Find a level of sacrifice,” said Black. She cited as an example a daily soda at work. At a cost of about $1.25 for a 20 ounce bottle per day, the cost would be approximately $325 a year. When the soda is purchased from the store at $5 for a 12 pack, the cost would be reduced to .49 cents per soda, or $128 per year. The difference then can be put into the savings account.

“It doesn’t always feel good to cut out these expenses,” said Black, “but in the long run it is worth it.”

Black points out that the children can help, too. Hold a family meeting and explain that there will be some changes in spending. Then put the children on a budget. According to Black, by giving them a fixed amount of money a week to budget for themselves, they are learning a huge life lesson.

Despite best efforts, circumstances will occur that will necessitate a change to the budget. “It’s okay to adjust the budget when a family’s need changes,” said Black.

What do you do when life throws a curve ball, such as a job loss? “Talk,” said Black. Talk to your family and the people living in your home. Talk to your creditors and find out what options are available to help you keep the bill paying commitment.

“Cut out spending on everything but the essentials,” advised Black. Also, look into community resources that can help you. For example, contact your township trustee to learn where to get help with groceries, rent, or utilities.

And make use of the time off by completing projects that you have not been able to finish; learn a new skill to make yourself more marketable in the workforce; or just take time for yourself and relax for a while.

For more information on the Family Nutrition Program, which includes classes on budgeting, healthy eating, and stretching your food dollars, contact the Ripley County Purdue Extension at 812-689-6511.