Budgeting Strategies Page 1 of 3

Budgeting Strategies
By Amerix Corporation Reprinted with Permission. Posted December 2001
Last Reviewed: February 2004

Financial Goals
After comparing your income and expense information, the next step in the budget process is to set financial goals. It’s a good idea to set short-term goals,
which you can accomplish within one year, and long-term goals, which can take five years or more. You may even find it helpful to set mid-term goals,
which can take one to five years. However you decide to set your financial goals, make sure your goals are realistic, measurable, and achievable.

z Realistic goals can be achieved in a specified timeframe - Paying off a $2,000 credit card balance in two years is a realistic goal, while paying off
a $200,000 credit card balance in the same timeframe is probably not.

z Measurable goals can be quantified - Putting $10 in a savings account each week is a measurable goal, while putting random amounts of money
in a savings account is not measurable.

Eliminating Credit Card Debt is a Measurable Goal

While your goals are specific to your situation, you may want to consider setting the goal of getting out of debt as your number one
priority. If you have credit card debt, you might consider reading the related articles in our library and using the calculators to
determine the best way to pay it off. If you’re only paying the minimum amount due, it can take you many years to pay off your credit
card balance. Making payments greater than the minimum amount due can substantially lower the pay off timeframe and total interest
paid. For example:

Approximate Cost Cost

Cost
Per Week Per Month
Per Year
Item Cost
Cup of coffee
$1.00 $5.00 $20.00 $260.00
Five days/week
Pack of cigarettes
$4.00 $28.00 $120.00 $1,460.00
Seven days/week

Eating lunch out

$7.00 $35.00 $140.00 $1,820.00
Five days/week
Dinner out for two
$40.00 $80.00 $640.00 $4,160.00
Two days/week

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The amount you would actually spend on these items may be different, but it’s clear that discretionary expenses can use up a large part
of your money. A good way to think of a discretionary expense is as something you want rather than something you need. Examples
include:

z Subscribing to cable pay channels

z Going to the movies
z Eating out
z Using extra telephone services, such as call waiting, caller ID, and voicemail
z Getting cups of coffee at a store
z Going to a salon to have a manicure or a pedicure
z Having your clothes dry cleaned
z Paying for Internet service

Think about your own expenses. Where can you eliminate or reduce discretionary spending to help meet your financial goals? For
example, if you can’t stop eating out completely, how about taking lunch to work three days a week? You’ll save approximately
$728.00 a year that you can put toward other debts. Other ways to save on discretionary expense include:

z Canceling cable pay channels or canceling cable completely

z Renting movies instead of going to the movies
z Grocery shopping for lunch and dinner instead of eating out
z Canceling extra telephone services
z Making coffee at home and taking it to work
z Learning to do your own manicures and pedicures or asking a friend to help you
z Using products that can dry clean your clothes in a dryer or stop buying dry clean-only clothes
z Use a free Internet service provider

Another way to save on discretionary spending is to do things that don’t cost anything. To learn more about free stuff, read the related
articles in our library.

Managing Variable Expenses

It’s also a good idea to look at variable expenses as a way to decrease spending. Variable expenses can change month to month, such
as:

z Long distance
z Electricity

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z Transportation

Think about your own expenses again. How can you account for variable expenses and keep them as low as possible? Using the
examples above, you could:

z Eliminate some or all long-distance calling

z Write letters or use email instead of the telephone to communicate long distance
z Turn all lights off when not in use
z Switch from 100 watt bulbs to 60 watt bulbs
z Set your thermostat to 65 degrees in the winter and 75 degrees in the summer to save on heating and cooling
z Carpool to work
z Trade in your gas guzzling sedan for a more economical compact car

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