As budgets tighten, there are ways to save

Government is not the only one facing budget shortfalls. Considering the price of gas and the jump in utility costs, which inevitably are passed down in the form of higher prices for many other things we buy, everyone is tightening their belts.

Add up such necessary items as day care costs, rent, car payments, insurance, and other regular monthly bills, and there are many people who barely have enough to make it from paycheck to paycheck.

Let’s look at your typical single mom making $10 an hour. Filling her tank is cutting into her spending money by $30 a month. If her margin each month is $50, she’s down to a buffer of $20. That’s not enough for comfort.

Paying particular attention to how we budget things has become paramount, and yet many people find themselves without the ability to assess what works and what doesn’t. There are some common mistakes we all make when looking at budgeting:

Savings and Retirement Accounts: There are all sorts of young people who work at the BBB who don’t participate in our 401(k) plan. In essence, they’re turning down a raise. The company kicks in tax-free dollars to all participants.

If your company offers such a plan, and you’re not using this tool, you’re missing a big boat. Start with a minimum contribution of $25 a month, add the percentage your company kicks in and toss in the tax advantage, and that $25 you contribute each month is costing you only about $20. It really does add up over time.

Dipping into your retirement account is not often smart to do. Tax ramifications aside, you’re robbing your future. Think Social Security will take care of you? Think again.

Savings: Emergency savings accounts are critical, but make sure you have strict guidelines for when you will take money out. If you want to set aside money for an expensive vacation, set up a separate account.

When you look at your budget, knowing that you need to cut someplace, this is not the place to begin. Pay yourself first, and if you lack discipline, your employer might have a “direct deposit” safeguard that could be set up as a savings account for you. For some, if we don’t see the money in our paycheck, we don’t tend to spend it.

Many people use the IRS as a savings account. They withhold to the max each year in order to get a sizable refund. I have never understood why people let the government use their money in this manner for a year.

Where can you quickly begin to save some money?

• Don’t eat out every day. Save those meals out for special occasions and pack a lunch.

• If you are spending $4 a day on lattes, add it up. Over a month you spend well over $100.

• Prepared foods are expensive; making it yourself could save a bunch.

• Cut down on trips in the car, combine trips, and carpool, if possible.

• Turn down the heat at home, put on a sweater.

• Is there a cheaper way to entertain the kids? We are fortunate to have world-class parks. Maybe they don’t need the latest video game.

• Are name brands that important? When I raised my daughter as a single mom, I would pay the price for the item, and she paid the higher price for the name on the garment. That left it up to her just how important purchasing that item was, since the bigger price tag hit her pocketbook, not mine.

So, if we now take our hypothetical single mom who’s eating out three times a week and picking up a latte each workday, just reducing these treats to once a week will save her $144 per month. Amazing, huh?

As we move into the holiday season, budgets are going to become even more important. Holiday celebrations tend to involve hidden costs, just like everyday life.

The best way to shed light on all those hidden costs is to engage in a simple task: journal your spending for two weeks. Track everything, down to parking meter money. When you begin each day, count the money in your pocket or purse, then count it again when you get home.

Use checks and credit cards, but track those receipts and ledgers, too. There will probably be days you are not sure where that extra five dollars went.

With this gauge, you should be able to find a spot or two where you can squeeze or reroute some money. Set your priorities, make your savings and retirement the first order, and you can get a better handle on where your money goes.

If you need help with debt overload, call us or visit this BBB link: http://www.bbb.org/tips/clearpoint. The BBB System has begun partnering with Clearpoint Financial Solutions (formerly Consumer Credit Counseling Services of America, Inc.) to offer credit counseling tips to the public.

The fact is, there’s no shortage of companies willing to prey on people in desperate debt situations. With new bankruptcy laws going into effect tomorrow, they are only bound to multiply. Start assessing and planning now.