Solutions to Make Better Decisions with Your Money

Budgeting: Why Just Spending Less Is NOT Your Answer

Budgeting - TaxACT

Are you looking for ways to cut costs and save each week?

Are you budgeting on a weekly and monthly basis?

Should you spend less or try to make more money when budgeting?

You can turn the heat down, grow your own vegetables, pick up kids’ clothes at garage sales, and take your lunch to work every day of the year.

At some point, however, you can only cut spending so much, for so long.

In fact, if you concentrate your energy on saving money, and don’t try to increase your available cash flow, you could be locking yourself into watching every dime when budgeting – possibly for the rest of your life.

You can’t scrimp your way into prosperity.

In fact, when money is tight, people often have a hard time repairing things and spending money where they really should.

Dental checkups and car maintenance are easy to put off, and whatever breaks in the house may stay that way.

Delayed maintenance doesn’t really save money – it just puts it off for later, when the repairs will probably cost more.

Trying to live in severe cost-cutting mode for too long can be tiring, too.

Eventually, someone in your family will fall off the budget, or at least become very hard to live with!

One way to think about budgeting is that it’s going on a diet to lose weight.

Cutting a few hundred calories a day can help. If you cut calories too much, however, your body starts to shut down.

Either you start burning far fewer calories per day, or you feel like you’re starving and raid the refrigerator.

It’s inevitable.

Making money without watching spending won’t work, either

Before you delete your budget spreadsheets and decide to just work on making more money, however, consider what happens when people go too far the other direction.

The diet analogy holds true, again. You can burn 500 calories on a nice, long run. That beats trying to cut another 500 calories out of your daily intake.

However, if you use your run as license to eat a piece of cake, washed down with a large mocha latte, you’re worse off than when you started.

No matter what you earn, you can always outspend it if you’re not careful.

How to make more money

If you decide to work on the income side of your budget, you have lots of choices for how to do so.

For example, some people can start by selling something they own, and then possibly make a couple hundred dollars a month on eBay or Craigslist buying and selling things.

For other people, simply working more hours, or adding a part-time job, may be all they need to do.

Even if jobs are scarce in your area, people always need services done. Find something people need, that you’re good at, and you’re in business.

Maybe it’s house cleaning or childcare, or after-school tutoring.

Be sure to use your special skills. You’ll be happier and you’ll make more money that way.

For the long term, work on increasing your earning potential.

If you’re stuck in a dead end career, what are you doing about it – today?

If you have access to a free library, you can learn how to start a business, improve your job skills, or apply for a better job.

You can take classes at a community college or online.

Most career goals can be reached one step at a time.

For example, if you want to be a nurse, consider starting as a nursing aide or licensed practical nurse (LPN) while you get more education.

If you want to start a restaurant, first try working in one, perhaps as a second job.

No step is too small if it’s taking you in the right direction.

Everyone agrees – we all need to keep our spending under control.

However, taking steps to increase your income is often easier and more productive than trying to cut your budget down to almost nothing.

The best way – in fact, the only way – to make a budget work is to optimize both income and expenses until you find a way to meet current expenses and work toward your financial goals.

Do you think you spend more or less money than your parents did, after adjusting for inflation?

Photo credit: Ed Callow [ torquespeak ] via photopin cc

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About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.