Making a Budget: Proactive and Reactive Approaches

by Lehecka G

There are a couple of different basic approaches to budgeting and living-frugally, well-within your means:

Making a Budget: Reactive Approach

The reactive approach is to develop small habits which done together over a longer period of time allow to you save and invest extra money for rainy day emergencies, or to accomplish something better and significant in your life.

A first habit or step could be to take what you have coming in after taxes and set-aside enough to cover your significant expenses like mortgage/rent, car or loan payments, insurance, utilities, ... take what remains, set some aside to short-term savings or emergencies, and take the rest and allocate a portion for each day or week.

Try not to spend more than that each day or week.

A second habit could be to take any money which you allocated for a day or week but did not spend, and set-it aside. Either save it in an insured saving account, or invest it in a relatively stable long-term investment, or if you do not have access to such, at least save it (like in a jar of coins or cash, or collectibles which you are sure will appreciate in value).

A third habit can be to take a look at what you "waste" (food, other things you throw away in your trash, and utilities: water, electric, gas, ...) and figure out ways to reduce (or at least recycle) how much you just throw away or waste.

In some areas of the U.S., you can get paid (at least enough for some gas money) for recycling aluminum or other metals/papers (usually not glass nor plastic). Many families unnecessarily throw out a lot of food, both unprepared "scraps" and leftovers.

People unnecessarily light and cool/heat unoccupied ares in their homes, leave electronics plugged in and "running" when not in use, ...

Try to think of innovative ways which you can re-use some of your throw-aways (like using plastic bottles or containers to organize other loose things around your home).

Instead of throwing away clothing which is still in relatively good condition but might not fit or be somewhat out of style, consider donating it to a charity like GoodWill, the Salvation Army, or your local church/homeless shelter so that others in need can make use of it and you might be able to take a tax deduction for a portion of its value.