It is always nice to know that you have money in your pocket during times of crisis and emergencies.

Occasional recreational activities and buying luxury items that you want to purchase can add spice to your life.

How can you possibly have the extra money yet also have a comfortable everyday living? This is what the magic of budgeting can do for you.

Simply put, budgeting is the act of being disciplined and organized in handling your money. Proper personal budgeting is the key to financial freedom. Budgeting does not only have to do with numbers either.

More importantly, it deals with the mental and emotional side of money handling. Financial professionals would love to say that personal budgeting is basically 80% behavior and 20% math. One’s behavior towards money would dictate how he or she uses and saves money.

If you are an impulsive buyer your idea of money is something that you can easily spend because of the fact that you can also easily earn it. With such thinking, you would lose too much money before you even know it.

Budgeting should be done in all honesty, as you are only hurting yourself if you fudge the numbers. You should know how much money you are earning from your regular work as well as any other means of income. Record the numbers that reflect all of your expenses and label the things that you spent the money on. By doing this, you will see how much money is coming out of your pocket everyday.

In evaluating your budget, you should be able to pinpoint the areas where you are spending too much money. It may be the regular nights out at the nearby club or your compulsive need to shop online. As soon as you see your everyday expenses before your very eyes, you will realize if you are living beyond your means and what you can do to cut down on your expenses.

To help you get started with personal budgeting, here are the basic things that you need to do.

• Keep a diary of the things that you purchase, no matter how small. This way, you can monitor your everyday expenditures. Jot down ALL the things that come out of your pocket and also the things that you pay with a credit card.

• Shop with a list. When you decide to head out to the mall or grocery store, it is always a good idea to list down all of the things that you need to buy. Once at the store, stick to your list and only buy the things that you need. Here are a few more tips on how to curb impulse buying.

• Set a limit on the amount of money you will spend. For example, if you are to spend a night at the bar with your friends, you can set a certain budget and do not, at all cost, go over your set limit. This is where you will need discipline to avoid overspending. There is nothing wrong with going out and spending money as long as you establish limits.

• Keep an open mind whenever you are plan to purchase something. Ask yourself: Is this purchase an investment? Is it a necessity? Will I gain something out of this purchase? If the answer to these questions is a yes, then you have yourself a good buy. If you answer no, you might want to hold off on making the purchase.

More than anything, personal budgeting is personal discipline. Keep in mind that you need to budget your money all of the time. With a “budget” mentality you will be able to save up big and live your life in utmost comfort.

Would you like a little more breathing room in your budget?

Whether you follow a very strict monthly budget where you allocate each dollar to specific goals or follow a more loose budget where you meet your savings goals and live on the rest, I am sure you wouldn’t mind reducing your expenses.

Over at CareOne Credit there is a great article with 101 ways to trim your budget. While I don’t agree with all of the suggested tips, I thought that I would highlight a few of my favorites.

• Be realistic. How many people do you know that have started a diet and failed? One of the primary causes of failure is that they go to such an extreme at the beginning of the diet that they cannot possibly sustain that long-term. The same holds true with budgets. If you need to reduce your expenses, be sure to stay realistic and create a plan that you can live with month to month. When you try to cut everything at once, you will face a difficult road to stick to your budget.
  
  
• Be honest with yourself. I’ve mentioned before that my wife and I did not begin to truly eliminate our debt until learning to be honest with ourselves. When you lie to yourself about your financial situation, you are only hurting yourself. Don’t keep your head in the sand and do your best to be honest with yourself.
  
  
• Install a programmable thermostat. While I think this is a great tip, I do know it may not hold the same value for everyone. In our situation, my wife has been a stay-at-home-mom and therefore it is rare that there is a time of day when someone is not home. However, we still are able to take advantage of the programmable thermostat to automatically adjust the temperatures at certain times of the day or over weekends when we are home much less.
  
  
• Cut down on dry cleaning. We have actually saved a decent amount of money with this tip. There was a time when I would take all of my dress shirts to the cleaners every week to be washed and pressed. As much as I enjoyed not having to iron all of my shirts, I realized that I would sooner use that money for other purposes and cut this expenditure.
  
  
• Get your hair cut at a teaching salon. Other than my wife, we have not had an expense for cutting hair in a very long time. We’ve been able to cut this expense from our budget because my wife is a licensed stylist. Although I am a rare breed that actually wishes I would go bald, so all she really has to do is adjust the clippers as low as they will go and buzz off all my hair. If you’re not adventurous enough to try haircuts at home, going to a teaching salon can save a considerable amount of money – particularly for the ladies!
  
  
• Sleep on it. We’ve used this strategy to curb impulse buying for quite some time and it really does work wonders. In many cases you will come to the realization that you don’t need (and possibly don’t even want) the item in question once you have delayed that instant gratification.
  
  
• Bring your lunch to work. This can be a huge area to save money. In addition, don’t feel that you have to limit it to lunch as you can also save money on breakfast. I’m guilty of eating out for lunch more often than I should and I know this is an area where I can cut back if we have a need to reduce our expenses.
  
  
• Skip snacks at the theater. There are a few ways to save money if you go to the movies and skipping the snacks is one of the most cost-effective. If you simply cannot make it through a movie without a snack, stop off at the store before the movie and grab a box/bag of candy. You might need to stuff it in your pocket depending on the theater’s policy but it sure beats paying through the nose for their candy. Another way to save money at the theater is to see a matinee instead of the “primetime” showing. The theater by us has even cheaper tickets if you go before noon so check the theaters near you.
  
  

There are many more ways to trim a little bit out of your budget but the above tips are a few that we have implemented at one time or another in our lives.

What are your favorite tips for reducing your budget? Let me hear them!

How much money do you budget each month towards eating away from home? Maybe I should first ask whether you are even following a budget or spending plan but the truth is that people are spending more and more on eating out.

This morning I read an article in the Chicago Tribune that discussed the stereotype that women are expected to cook well and whether that really holds true.

The part of the article that I found the most interesting, as well as somewhat alarming, were the statistics that were provided at the end of the article. As an example of the numbers provided by the NPD Group, National Restaurant Association and U.S. Bureau of Labor Statistics:

:: In 1960, 21% of overall food dollars were spent on meals away from home.
:: In 2005, 44% of overall food dollars were spent on meals away from home.
:: In 2006, 24.1% of restaurant meals were ordered from the car.
:: In 1985, 23.6% of home-cooked meals included dessert.
:: In 2006, 14.6% of home-cooked meals included dessert.

Looking at these numbers, you can see that we are spending more money on meals away from home and it is rather alarming that nearly 1/4 of those meals were ordered from the car. It is interesting to note that less home-cooked meals include a dessert than 20 years ago. However, I am curious if that means more people go out for a dessert after a home-cooked meal or that people are just eating less dessert.

Personally speaking, we allocate $100 per month to dining out. While that may be too low for some people or too high for other people, we have found it to work well for us. Looking back at our expenses, I have to say that a good deal of our dining out is meals on the go as we run from one son’s baseball game to another son’s hip-hop practice.

If you do not currently follow a budget, try to track how much you spend on meals away from home. Often times people think that they do not have enough money to save or invest, yet they spend hundreds of dollars per month on eating out. Not too long ago I recall seeing a show on television where a family was spending over $1000 per month on eating out and they were struggling with debt.

When you think of eating out as essentially eating your money, it may put a new perspective on your desire to stop for a meal away from home rather than driving home and spending time to cook a meal. Challenge yourself to eliminate one restaurant visit this month and put that $10-20 (or whatever amount) directly into your savings account.

Stop eating your money!

Ever since getting a handle on our consumer debt and leading a life free of paying other people interest (other than our mortgage company), I actually look forward to the daily mail and any bills that may arrive. While most of our monthly bills are now configured to automatically bill my rewards credit card, there are still a few that arrive in the mail.

As weird as it may sound, I look forward to the arrival of these bills as I will then sit down at the computer and schedule the payment and update my monthly spending plan accordingly. I think that part of this enjoyment is that I have been in a place where I dreaded the monthly bills arriving and now that I am debt free, it is much more liberating.

When a new bill arrives, I know that there are not going to be any questions about where we will get the money to pay the bill or otherwise struggle to make ends meet. When we were carrying debt, that was not always the case. So how did we get to this point? Well, the two biggest factors were that we made a commitment to following a monthly budget (aka spending plan) and we make every attempt to live below our means.

Is my wife right in stating that I am just weird when it comes to the bills or do other people experience this odd source of enjoyment?

However, today I heard of an interesting alternative to the weekly allowance. Since the typical weekly allowance is a relatively small amount, pay your child an annual allowance. The total allowance will still be the same amount but it introduces a few additional lessons for your children to learn.

Children and Money Management.
By paying your child an annual allowance, they will have to do more planning to make their money last for the entire year. That first year they may be overwhelmed and spend everything within the first few weeks or months, but they will have to learn to manage their money if they expect to enjoy it all year.

Learning to Budget.
While closely related to the ability to manage their money, an annual allowance will lend nicely to helping your children learn the concepts of creating a budget. For instance, they may be fond of a particular type of toy and you can work with them to create a budget where they can afford to purchase one new toy every month. Looking at the big picture, they can budget the 60/30/10 split of spending, savings and charitable contributions as well.

Learning from Mistakes.
As mentioned earlier, children are bound to make some mistakes when they see that large sum of money in one pile. To be honest, many adults still make mistakes when they are confronted with a large pile of money. But by letting them make those mistakes now and learning the consequences, they will be better prepared for managing their money as an adult.

The concept of an annual allowance is appealing to me and is something that my wife and I are discussing for our children. It is still early in the year so we may be able to implement this for 2007 or we can plan it out and start fresh in 2008. What do you think about the annual allowance versus a weekly allowance for children?

Today we were out at the store and they had their wallets with them. Our oldest son has become a complete Lego maniac and has Legos spilling out everywhere, which is why we did not get him any for Christmas this year. Needless to say, there are a few sets that he has been itching to buy and were in stock at the store. Without a second thought, he grabbed that off the shelf and said he would be buying it today.

We did not have a problem with this, as it is his spending money to do with as he pleases. We did ask him if he was really sure that he wanted to buy it and he said yes. Once he decides he wants something, he will pursue purchasing it even if he knows it will deplete his spending money down to pennies.

In complete contrast, our youngest son has a tight fist on his money. He has accumulated a little bit over $100, which is enough to buy the moon in his opinion. With seeing his brother getting a new toy, he also wanted to spend some of his money. He looked for something to buy and there were a few things he wanted. With each one, he would ask us how much money he would have left if he bought that item.

In each case, the item would have brought him under $100 remaining and that seemed to be a magic number to him. When he would hear that, he would put the item back and say he didn’t really want it that bad. As we were about to leave the toy area, he spotted a little toy gun on a clearance shelf. When he heard he would still have over $100, his eyes beamed and he decided he would purchase that toy.

So what does all of this mean? Not much really but it is a little insight into how their personalities are taking shape with regard to money. FWIW, our older son is much more like my wife in that once they have their mind set on buying something, there is not much that will stop them. Like our youngest son, I am more the type that would like to purchase certain items (that are within my means) but pass because I don’t want it to reduce my available funds by too much.

Since a good deal of their early money habits are learned from watching how we handle money, it is critical to always be aware of that and act in a financially responsible manner. What is the money personality of your children? Has your money personality changed from when you were a child?

With the average American household carrying about $8000 in credit card debt, the average tax refund of approximately $2500 could eliminate over 30% of that household credit card debt. Unfortunately, many people view a large tax refund as a windfall and rarely spend it wisely.

If you are carrying any type of debt, can you really afford to provide the United States government a no interest loan each year? When you receive a tax refund, that is exactly what you are doing. The average taxpayer has overpaid their taxes by more than $200 per month.

By adjusting your tax withholdings by filing a new W-4 form with your employer, you will reduce the amount of taxes taken out of each paycheck. On average, that would mean an extra $200 or more in monthly income. That money would then be available to make extra payments towards your credit card bills or other debt.

Take the time to review your current tax withholdings and make any necessary adjustments so you can increase your monthly income. If you are not sure how much you should have withheld from your paycheck, the IRS has a tax withholding calculator to assist you.

Think about how much sooner you will be able to eliminate your debt when you stop loaning the government interest-free money and use that money every month to reduce your high-interest debt.

The fees imposed by the bank that owns the machine, as well as possible fees from your own bank, can really add up over time. While the fees may seem like a small price to pay for the convenience, you can usually avoid the fees with some simple planning.

Take a few minutes to map out where the closest non-fee ATM is located in relation to your office and your home. On days when I do not bring a lunch to work, I take the few minutes to stop at the bank near my office that is in my bank’s network to get some money rather than wait until the last minute and use the machine in my office building.

When I have plans on the weekend, I will stop at my bank on the way home from work on Wednesday or Thursday rather than waiting until I am near the restaurant on Friday night. These simple examples of planning ahead come with the reward of saving me the few dollars in fees. Again, it might not seem like much but even saving $3-$5 per month in fees can add up to a nice annual savings.

Do you have any other tips that have worked well in your efforts to avoid ATM fees?

With your list of expenses, begin to organize them into the two main categories: essential expenses and non-essential expenses. Your essential expenses are the items that are required for daily living while the non-essential expenses are the items that many consider to be luxuries.

Essential Expenses.

Within the essential expenses, you will see that you have a few different variations. There are fixed expenses, which are the same from month to month, that include rent or mortgage payments, car payments, car insurance and tax payments. Some of these fixed expenses will be irregular, which means they are not paid every month but can be budgeted for on a monthly basis.

In addition to the fixed expenses, there are variable expenses that are essential. These are expenses that fluctuate from month to month and include items such as your heating/cooling, car maintenance, gasoline and possibly groceries.

Non-Essential Expenses.

Non-essential expenses include things that are typically classified as “wants” as opposed to “needs” and is often the area where people spend the most money. This category includes items such as cable television, high-speed Internet access, eating out at restaurants, gifts, cell phones, daily coffee, etc.

Often times people will try to rationalize the fact that these expenses are essential. While there may be cases where that is true, usually it is just an excuse to try and justify the expense. If you feel one of these items is absolutely essential, classify it as an essential expenses.

Why is this important?

Are you wondering why it is important to classify your expenses in this fashion? By breaking down the data into manageable pieces, the process of creating a budget becomes easier and is less likely to scare you away.

Too many times people without a spending plan are spending more money than they earn and this can be an alarming realization if you fall into that group. However, by taking the time to classify your expenses as essential and non-essential, you will know where you can eliminate expenses if your outgoing funds exceed your incoming funds.

In the next installment of the budget creation process, we will examine the process of categorizing your expenses and making your first rough draft of your spending plan.

With recent commercials and promotional mailings, I sat there wondering why new customers are offered such attractive deals while loyal customers pay full price. Since it was late on a Thursday night, rather than try and call customer service I opted to visit Planet Feedback and send a letter.

Having used Planet Feedback in the past, I was aware that some companies actually monitor this feedback and respond in a timely fashion. However, I had no idea that there would be a response so quickly or that it would be so profitable.

This morning I received a telephone call from my cable provider, less than 12 hours after submitting my inquiry. The woman that I was speaking with indicated that they had received my letter and would like to know what they could do for me today.

After explaining my concerns that new customers receive attractive offers while loyal customers are left with their service at full price, she commented that I had recently received a promotional offer on my cable service as a result of problems with the On Demand service so she could not provide any discounts on the cable service.

The good news is that she was able to offer me the broadband Internet service for a price of $19.99 per month for six months. The current monthly price is $42.95, which means this offer represents a savings of $22.96 per month or $137.76 over the six month period.

In the time it took me to draft an email on Planet Feedback and talk for a few minutes on the phone, I saved approximately $138 over six months. There was absolutely nothing to lose but a few minutes out of my day, which was well worth the end result.

Take a few minutes out of your day this holiday weekend to call your cable provider or use Planet Feedback to ask for a discount. Come back here and share your success stories.