How to Cut Your Budget When There’s Nothing Left to Cut

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What can you do to cut your budget? This is one of the common questions people have. You’ve already done everything you can, but it still does not work.

I remember when my husband and I were struggling after I quit my job to stay home with our first-born. It was tough, and we all know you can’t get blood from a turnip!

Before you look at what you can do to save on your budget, you need to make sure you have one. Your budget needs to be in writing. It needs to be a roadmap showing you where you will spend your money.

Here are some different things we tried, which you can use, too, when you need to cut your budget even more than you already have.

1. Find Ways to Bring in More Money

Of course, you can’t give yourself a raise at your job, but there are other things you can do to bring in more money. We ended up selling items. I found a part-time, work-from-home job with my prior employer and eventually started this site. You sometimes need to look inside and find where your passion lies, and you might find the perfect way to increase your income.

You can find more ideas for how to make money while working from home here. While many of them may not work for you, there might be an idea which turns on that light bulb and sends you off on a path you never would have thought of otherwise.

2. Go a Bit Easier on Yourself

Sit back for a minute and look at where you were before you knew about budgeting and stretching your dollar vs. where you are now. Be proud of what you’ve done and the changes you’ve made. Sometimes, just knowing that you’ve made positive financial changes is enough to make you feel proud. It’s good to celebrate the small victories.

3. Avoid Comparing Yourself to Others

This is a tough one. You may see others who claim that they found a way to shave their budget by hundreds of dollars every month. While we would all love to be able to do that, it may not be realistic for you. You may have additional expenses others do not have. Your income is different than theirs. You have your own financial goals. When you stop comparing yourself to others, the need to keep up and compete will stop and you can feel better about your own budget.

4. Look at Your Needs vs. Your Wants

This is a tough one. There are probably things you have in your life which are wants rather than needs (and vice versa). Do you have both a landline and cell phone? If so, do you need both or do you want both? Why not drop the landline?

Take a look at your entertainment. Do you need cable?  Can you try to use another way to knock down your cable bill (or eliminate it completely)? Do you need to eat dinner out once a week — or do you want to dine out?

When we were getting out of debt, we did not eat in a restaurant for more than a year. I kid you not. It was tough, but we survived. The reason was that we determined that it was a want to dine out and not a need. Instead, we took the money we would have spent on dinners out and put it toward our debt instead.

5. Seek Assistance

This may be the time when you need to reach out to get help. There are times when you just can’t make it on your own, and there are programs and services that are here to help. You can check with your local government to find ways to get help with utility bills, apply for food stamps, locate a food pantry and even get assistance with child care.

Just because you ask for help does not mean you are not financially responsible. We all have times when we need a hand, and these organizations can provide it. Once you get back on your feet, you’ll have the chance to pay it forward and help someone else.

6. Cut Your Spending

This may seem simple, but you can do little things to reduce your spending at the store. You can switch from name brands to store brands and consider cutting coupons. While you may not find them for the fruits, vegetables and meats you need, you can find them for the household products you use and many other products around your house. You can combine these with sales to ensure you pay the lowest price possible.

You might also consider changing where you shop. For example, Aldi is an amazing store with some of the lowest prices available. You can easily cut your spending by nearly 50% just by changing to this store. You can find some other ways to slash your grocery bill here.

If your budget is not working, then it is time to make some big moves. It will not be fun. It will not be easy. But it is something you just have to do.

[Editor’s Note: You can monitor your financial goals, like building a good credit score, each month on Credit.com.]

Image: monkeybusinessimages

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Things You Need to Know if You Want to Master Your Money

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It’s ironic people shy away from talking to others about money, considering everyone has to deal with it. But instead taking advantage of this shared experience, a lot of people keep their questions to themselves and outwardly pretend they understand what they’re doing with money. Only once they’ve dug themselves in a hole do they start asking for help.

No one is born understanding personal finance. It’s mostly on you to figure it out as you go, which doesn’t always work out well.

“Typically in America you don’t learn about these things — you don’t learn about debt and interest,” according to Alex Sadler, managing editor of Clark.com, the namesake site of personal finance and early retirement icon Clark Howard. “You’re handed a credit card … and it’s up to you to read the fine print. People get into serious trouble.”

Sadler knows this not only because of the people who ask questions on Clark.com but also because of her own experiences. “I maxed out credit cards, I had a student loan I didn’t understand, and living that way and not changing my lifestyle, I realized that that was going to prevent me from doing things in my life that I wanted to do.”

Ideally, people would get to know how money and credit works before they start using it, not the other way around. But that backwardness is often the reality of Americans’ personal finances, which is why Sadler and the Clark.com team started a new project called CommonCents.

“A lot of problems people face is not understanding what they are trying to tackle,” Sadler said. “A lot of times people … they think they have tried (to get out of debt) and they just don’t understand how it all works and how to make that attempt and effort successful.”

We asked Sadler about some of the core concepts that people need to know — but often overlook — in order to master their finances. Here’s what she said.

1. Understand Interest

Sadler said this is a common issue among people who reach out to Clark for help getting out of credit card debt.

“A lot of people think because they’re paying the minimum monthly payments they’re not getting charged interest,” she said. This, of course, is totally false. It’s not that making the minimum monthly payment isn’t a way to get out of debt — it’s just that it can take an extremely long time.

So, how does interest work? As far as credit cards go, you can get a sense of it by using this free credit card payoff calculator (and if you have credit card debt, the tool can help you make a plan to pay it off.)

2. Learn What it Means to Budget

It’s perhaps the core tenet of personal finance: Budgeting. But you can’t hope to budget if you don’t really understand what it means.

“Budgeting means making sense of your money: How much money are you making? How much money are you spending?” Sadler said. Budgeting, no matter how you do it, boils down to one thing: “Spend less than you make. You’re living paycheck to paycheck? You’re not spending less than you make.”

That brings us to her next point:

3. Know Your Numbers

“The majority of people that Clark talks to about debt, the first thing he asks is, ‘OK, you have credit card debt — how much do you owe?’ The majority of the time, this person asking the question does not know the answer,” Sadler said. “How do you plan to pay off your debt if you don’t know what you’re facing?”

That’s only part of the spend-less-than-you-make equation. Knowing your take-home earnings, your debt, your spending, your assets — these are all things that can help you make smart financial decisions every day that will also make sense years in the future, Sadler said.

Image: macniak

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