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Budgeting During Difficult Financial Times

These are trying times and many families have experienced financial shock waves over the few past months. And that old family budget, made when times were good, may not work anymore.

Now is the time to reassess all of your spending and saving choices and create a budget that will help you and your family move forward.

"The original budget may have worked, but now they may have to re-create it and tweak every line item," explains Judy Lawrence, a budget coach and counselor and author of "The Budget Kit."

These tips will get you started.

Budgeting Tips: Track your spending

A great way to begin a new budget is by keeping track of every penny you spend for a month.

Carry a small notebook and write down every purchase from cups of coffee to tanks of gas to haircuts and dinners out. Note all the bills you pay including weekly grocery bills, rent or mortgage payments and utilities and car payments.

By month's end, you'll have a good idea where your money is going. And just by monitoring your spending you'll begin to make wiser choices.

"You will be able to cut back 10 to 20 percent of your discretionary spending simply because you are more aware of where your money is going," explains Steve Rhode, president of the Myvesta Foundation, an international organization dedicated to helping people create healthy financial lives.

Budgeting Tips: Rein in discretionary spending

A great way to begin a new budget is by keeping track of every penny you spend for a month.

Carry a small notebook and write down every purchase from cups of coffee to tanks of gas to haircuts and dinners out. Note all the bills you pay including weekly grocery bills, rent or mortgage payments and utilities and car payments.

By month's end, you'll have a good idea where your money is going. And just by monitoring your spending you'll begin to make wiser choices.

"You will be able to cut back 10 to 20 percent of your discretionary spending simply because you are more aware of where your money is going," explains Steve Rhode, president of the Myvesta Foundation, an international organization dedicated to helping people create healthy financial lives.

Budgeting Tips: Rein in discretionary spending

When money is tight, cutting back on discretionary spending is key.

And that means cutting back on dinners out and $3 cups of coffee and all those impulse purchases you make and forget about. When you're flush with cash, these fun purchases are no big deal. But when you're looking to minimize your spending and maximize your savings, these non-essential items are the first places to cut back.

So take a close look at your cable bill -- can you get by with fewer channels? And what about getting free videos from the library rather than renting movies or downloading flicks off the Internet?

Ease back on eating out and treat yourself to a nice dinner at home.

"If you need to cut back there are a lot of ways you can do it without really sacrificing the quality of your life," says Scott Scredon, a spokesman for Consumer Credit Counseling Service of Greater Atlanta.

Once you rein in your discretionary spending, you'll have more money available for other areas of your budget and for savings.

Budgeting Tips: Re-evaluate fixed expenses

Next, it's time to take a hard look at those fixed expenses you pay each month. They include bills for your rent or mortgage, student loans, Internet, cable and car payments.

Providing a home for your family is a top priority so make paying your rent or mortgage a top priority in your budget. But do your best to stay current with all your other fixed expenses as well.

If you've lost a job, you may want to contact the lenders for your home, auto and student loans and ask for reduced payments due to hardship. Make this call before you fall behind on your bills.

And don't forget about your insurance premiums. Whether you pay your insurance bills each month or every six months or once a year you want to make room for each insurance bill as a fixed expense in your budget.

One way to save money on your insurance costs is to increase your deductible (the amount you pay out of pocket before insurance coverage on a claim begins). So you may want to contact each of your insurers and find out how much upping your deductible will trim your insurance bill.

As expensive as it may be, hold on to your health insurance coverage.

"Don't drop medical insurance. Some folks think they can't afford it anymore, but we can't afford not to have it," Jonni McCoy, author of "Miserly Moms" explains. "I have seen too many disasters happen to folks who have no insurance."

Budgeting Tips: Re-examine variable expenses

Variable expenses fluctuate month to month. They include bills for long distance, cell phone, utilities, credit card and groceries; and expenses for gas, auto care, home and yard maintenance and personal care, including haircuts and dry-cleaning.

A few simple cost-cutting measures will help you save on variable expenses.

Turning down the thermostat a couple of degrees in winter, and up a couple of degrees in summer will help trim your energy costs. Which is more important: your land line or cell phone? Consider cutting back on one or the other.

To curb auto expenses, consider car pooling. To cut back on auto expenses in a big way, downsize from two cars to one. Or trade in a newer car with a hefty car payment for a more economical and fuel-efficient model.

Budgeting Tips: Use your savings wisely

For many struggling families, it may be time to dip into that emergency fund.

But you'll want to spend that savings carefully and be sure to trim all possible expenses before draining a penny from your savings.

"If you have lost your job you need to think of your savings as water in a jar that must nourish you on a long and hot journey across a hostile desert," Rhode advises. "You need to preserve every drop of water and use it wisely and sparingly."

For folks who are still employed but nervous about their financial situation, trimming spending and building up a savings cushion is a good strategy. So when you receive your paycheck, be sure to put 5 to 10 percent of it into your savings account.

Having an emergency fund that covers three to six months of living expenses is ideal. But every little bit of saving helps. So do the best you can.

This is a time to be savvy about your financial choices and stay positive.

"Remind yourself that this is a temporary situation and not the rest of your life," Lawrence advises. "Also realize that you are certainly not in this alone – many households down the block are doing the same thing."

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