November 6, 2000
Building a nest egg can really help make you feel like you're cushioned a little against the unexpected. Budgeting can help you get there, and can help you feel more like, well, a grown-up. I hope you find this article helpful in that respect. I'm on an aggressive plan to save some money, myself. Help me out! Send my boss an email and tell him I deserve a raise.

If you have any great sites to recommend or comments on what you would like to see in this newsletter, please feel free to contact me at Betsy@herreality.com

Betsy Boyd
Editor, Her reality.com

In the last issue, I told you how to get a handle on how much money you spend each month on the hard-to-track incidentals. I even showed you a tool that can help you figure out how to cut those expenses. Now we can put that information to use in setting up your budget.

First, you have some decisions to make. The easiest criterion to sort your expenses is variable or fixed. That is, rent is the same every month, but your car repair and maintenance aren't. Within each category, we'll break it down further.

Fixed Expenses
These expenses can be hard to cut, but they often can give you the most savings. Rent or mortgage payments should be no more than 30% of your monthly income, but a lot of us overspend in this area. If you're really trying to spend smarter, think about how to cut here. A roommate? A move to a smaller place?

Other expenses are easier to cut when you look at them on a monthly basis. Take some time and shop around for cheaper insurance. Consider re-financing your car or selling it and buying a more economical one.

Variable Expenses
For your expenses that fluctuate some each month, like electricity, food, and long distance, take your last six months' records, or your notebook, and average them. Set your budget a bit above that amount for things you have to spend. Don't assume you can't cut here, though. Restaurant eating can be a huge expense for me, and it is easy to cut. Planning menus around sales at grocery stores and producing edible leftovers can cut your food bill since you spend, and waste, less. For items like clothing, which are usually a little more optional, get an average, and cut back to the bone.

The Tricky Parts
Some debt service is fixed (like student loans), while credit card payments can fluctuate. One way to simplify as you dig out of debt is to count your minimum payment as fixed, add 50% to it, then start making a habit of paying off every new dollar you charge every month, according to your budget categories. That is, if you charge a dinner, count that as part of your food budget, and make sure that amount gets added to your credit card payment for the month. The same with clothing and entertainment and so on. You'll be chipping away at the debt slowly but surely.

Getting Better
Decide your priorities: some experts recommend adding set amounts for savings, investments, or debt payment above the minimum into your fixed expenses.

Use any extra money in your expense categories to help meet those priorities. That is, if you don't max out your clothing budget in a given month, use the extra on your credit cards.

If you've used your current habits to come up with a guide and there isn't any money left over, it's time to go back and cut some more.

Why go to all this trouble?
If you're unsure of the benefit of budgeting, there's a lot of evidence out there that can help convince you. I once read a statistic that if a twenty-two year old starts saving $1000 every year, she'll beat someone who starts saving $2000 per year at age 30, just because of interest. The moral: save NOW. Here's a link to easy steps to saving, even on a tight budget.

Recently, I threw a dinner party for a friend who moved away. She wanted food with a Southwestern theme, and I had zero stuff handy to fit that bill. I'm on a budget, so I needed a cheap solution. It was a bigger party than any I'd thrown before, and while I knew I'd be combining various mismatched place-settings, I did want one thing that matched for everyone. Luckily, I remembered that I had seen bandannas used as napkins somewhere, so I set out to find some. I bought a dozen for about $1 each, and they really livened up the table. I highly recommend it. Another option would be to make some from stuff you have. Makestuff.com shares a great idea for more table decorations on the cheap and this project is quick, too!

Gifts and Craft Projects: Make your own placemats