My ABCD Budget Tip

Living on a tight monthly budget is a fact of life for the majority of folks in this world. It’s OK if life rolls along smoothly and nothing unexpected crops up, but for these folks, even a minor hiccup in their routine – unexpected car repairs, illness, and a thousand other things - can cause untold panic in the finance department! :ohman:

Crisis is not the only reason people need to watch their budgets closely. When we first started out with our home based business, my wife and I scrooged and watched EVERY penny. You may be a retiree living on a fixed monthly income, a single mother with kids to take care of or making the transition from a double-income family to a single-income family. Whatever the reason, when you need to watch your money, here’s a tip that has always helped us through some pretty tight, dry months. I call it the ABCD budget which stands for Always Budget Cash Daily. Here’s what you do:

Make a list of all your monthly expenses. This includes everything that you regularly pay for on a daily, weekly or monthly basis. Now subtract that total from your take home pay (or income).

Example:
Take Home Pay ($3000) – Total Expenses ($2,400) = Balance ($600)

Now the secret here is NOT to assume that you have $600 for the whole month. :hubba: When you assume that, you tend to spend more in the beginning of the month and find yourself wondering where the money went. :ohman: What you want to do is divide the $600 by the number of days in the month.

Example:
Balance ($600) / 30 days = $20 per day.

Now that’s your daily budget - $20 per day. What you want to do is always keep a mental note of your expenses everyday and make sure that you DON’T spend more than $20 a day. Obviously your target should be to have as many days as possible where you spend under $20. If you DO spend more than $20 for any day, then you have to make a mental note to deduct the overspent amount from your next day’s budget. It takes a certain amount of discipline to follow this but once you get the hang of it, it becomes something really natural.

You can vary your approach, maybe re-calculating your balance at the end of each week to see where you stand and work out your daily budget for the remaining days. This takes a little more effort but the less you spend each day, the higher your daily budget will be for the remaining days of the month. And if you consistently spend less than your budgeted amount each day, you’ll end up with money that you can save for a rainy day!

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