Wednesday, September 24, 2008

Cutting Costs...

This week is prep week for our 31 day challenge beginning October 1st.

Yesterday we got an overall view of the condition of our home. Today we are going to look at the condition of our finances.

Does this scare some of you? No... don't squeeze your eyes shut trying to keep from looking... no... it's ok.... come on... you can take a peek.... just a peek... Don't be afraid. God is with you here and now.

Today's home work is going to be a little bit more intensive than just a walk around the house taking notes. So I would set aside 30 minutes or more for this assignment. This may be a good time to put the kids in front of a movie so they can be occupied without distracting you.

To get a clear look at your finances we need to look at where you are now. We need to see what habits and behaviors have gotten us to this point. We need to determine what habits are good habits and what habits are unhealthy.

What I want you to do is gather your financial records for the past 3 months. I'm not going to ask you to drag out each and every receipt, but simply pull out your bank and/or credit card statements. If you don't have them in paper form, most banks and credit card companies have statements you can view online. Don't have any statements? Don't have any idea how to get one? Don't sweat it. Just do the best you can.

Also grab a three pieces of paper and a pen. On each piece of paper I want you to write the name of one month (June/July/August) at the top and make a list of categories down the left margin of your paper:
  • Tithe
  • Taxes
  • Savings
  • Insurance (Health/Life)
  • Car (Car Payment/Insurance/Tag and Taxes)
  • Gas/Convenient store
  • House (Mortgage Pmt/Rent Pmt/Property Taxes)
  • Phone
  • Utilities
  • Food/Groceries
  • Clothing
  • Child Care
  • Legal Expenses
  • Vacation Fund
  • Christmas Fund
  • Date Nights
  • Misc Expenses.
You may want to leave several lines between each category in case you have a category that has lots of transactions.

Now, I want you to take your statements for each month. Start at the top, work your way down, and put each and every expense next to a category.

For example, if the first debit on your statement was $120.00 to Krogers Grocery, that would be lists under Food/Groceries. That whole purchase might not of been only food, but we are not going to analyze that now, so we'll just file that under groceries in general.
Let's say the next debit is $38.00 to QuickTrip, write that next to Gas/Convenient store. We don't know if it was all gas or gas and some snacks, but we're not going to rack our brains trying to figure out how much was actually gas and how much was snacks and should be considered food. So just list it there.

Now, some of you this this will be easy, because you already have a budget and all you have to do is pull out your budget and see what is budgeted for each category. WRONG! I want you to see how you are ACTUALLY spending your money. We may THINK we know how much we are spending, but it's good to see how much we ACTUALLY are. Look at each and every transaction and give it a category. I want you to account for every single penny.

When you finish the first month's statement(s) simply start on the next month and keep going till you complete all 3 months.

Now, total up each category for each month, and then add all those totals together for each month.

So.... how did you do? You didn't have a heart attack did you?

How much did you spend each month? Is it more than what your total monthly income was? Was it under your total monthly income? Is it close to what you thought it would be? Were all three months about the same or did your total expenses fluctuate?

Now, we need to see where we can adjust. Most of your expenses will be fixed expenses, like your utilities, mortgage/rent, taxes, etc. But there are some expenses that we can adjust. The two usual suspects are food and gas. But lets look creatively at some of the other categories and see if we can trim them as well.
Look at your Misc Expenses category. Does it reveal that you have a yarn fetish and spend a great deal at Hobby Lobby? Well.. if so that could definately be trimmed.
What about your date night category? Could you get creative about date nights and find cheep alternatives to direct that extra cash some where else?
Clothing is a category we can get creative with. Or it can be cut out all together depending on what's in the closets right now.
Another one is car insurance and life insurance. How long have you been holding your current policies? Maybe it's time to start shopping around. Life insurance premiums are low, because companies are competing for customers who are recluctant to buy in this unstable financial market.
What about your car payment? Do you have a car payment? Can you refinance your car? Or better yet, can you sell your current car and get another one cheeper? Or even better, can you sell your car and do without that car for a while?

Now don't go through just yet and make your full plan of attack. Just make note of what areas can be cut back on and what areas can't. Then pray about it and ask God to give you some creative ideas. Go to your husband, and let him know what your'e doing, and ask him to pray about it too. (You also want to let him know what your doing so he has some fore warning that the spending is about to change.)

Now that we have a fairly good overview of where we are, we can put together a plan of attack! But before we put together a plan, we need to put together a tool box.

Tomorrow and Friday I'm going to give you a list of things to collect over the weekend and the first of next week. These things will be our tools of the trade. They will be what we use to help us execute our plan. And our plan is what we will strategize to come up with on Monday and Tuesday.

"How few there are who have courage enough to own their Faults, or resolution enough to mend them!" Poor Richard's Almanac

Be Blessed today.

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