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How to Take Charge of Your Family Budget

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Before we had our first son, I was terrified of how much it was going to increase our monthly expenses.

We were decent at managing our finances, but I suddenly felt that I had holes in all my pockets and all our money would just fall off into the new baby abyss.

I'm sure other families feel this pinch and are constantly looking for ways to save money.

While it's rare that you can eliminate a single expense that will give you control over your finances, you can usually save a lot of money by combining savings from several different directions.

Try some of the following money saving tips and use them to take charge of your budget.

1. Organize your grocery shopping.

The more organized you are when you go grocery shopping, the more money you can save. Have a list of items you need to buy, an envelope filled with related coupons, and a maximum budget you're prepared to spend on the trip (this alone can keep you from overspending).

Also, try to shop early in the week when stores are the least crowded. Crowds mean added stress, and that's never good for a budget-conscious shopper.

And one way to avoid stress is don't take your three boys to the grocery store if you can avoid it. I made that mistake one time when I was in need of kale for my new juicing craze. Holy moly was that mistake! Thankfully, I made it out alive, but I'm certain a few more gray hairs popped up.

2. Eliminate one service each year that you can do without.

The potential here is almost unlimited, since most of us have services we hardly use or don't use at all. It could be canceling a hardly used gym membership one year, a land line telephone service the next, and cable TV the year after that. It may only be $50 to $100 per month, but over the years it really adds up. The easiest way to do this is to have a constant budget going.

My wife is the queen at this, so we're always constantly reviewing what we're spending our money on each month. I also do this with my businesses (financial planning practice and blog) to make sure I'm not spending money on tools or subscription services I'm no longer using.

3. Never buy 'off the shelf.'

Any time you plan to buy something, especially something fairly costly, you should always do your homework first. Try the following:

  • Surf the web to see who has the item at the lowest price, or if any sales are coming up.
  • Check the website of the manufacturer and retailer to see if any coupons are available.
  • See if you can buy the same item second hand (more on that later).

By adding research to significant purchases, you can save hundreds of dollars each year. You don't want to do this for small purchases otherwise you'll burn a lot of time on insignificant savings, but you might set a threshold of say, $50 and above.

The best example of this is how we were able to save thousands of dollars when we built our dream home. In some cases, we were able to save 60 percent to 70 percent off the initial price that we found on mirrors, lights, vanities, etc.

4. Participate in -- and use -- your rewards programs.

Many companies offer rewards programs, but not as many people participate in them. Sign up for them wherever possible, and keep tabs of your points. Our first test with this was an Amazon credit card that gave us real money that we could use on Amazon.com. We let that accumulate until we actually needed something for the home, which was great.

I recently signed up for a Southwest rewards card and look forward to booking my first free flight soon. If you're interested in using rewards points for travel, check out a guest post on my blog that showed how you could get a family of five for free to Hawaii using reward points.

5. Never fly when you can drive.

Air travel has become so common that many people use it as a default choice whenever they travel. But if you are traveling with family, plan to drive instead of flying, especially if the trip is within a few hundred miles.

By driving, not only do you save the airfare of buying four airline tickets for a family of four, but you also have a car when you arrive. If you don't think your family car is up to the task, you can rent a compact for $300-$400 per week, or roughly the cost of a single airline ticket to many destinations.

While you're at it, sign up for programs such as AAA, to add even more savings to major travel purchases. You can save money on hotel stays, car rentals, restaurants and travel attractions, in addition to other benefits the program offers closer to home.

6. Sell what you no longer need.

Instead of throwing away items you no longer use, try selling them first to make some additional money. You can have a garage sale once or twice per year, and also sell on Craigslist or eBay. By doing this, you can often raise several hundred dollars per year.

In our area, we also have a Facebook community where you can sell stuff really quick. We've sold a couch for $150 that we bought at Ikea over 6 years ago for $400 in one day after we posted it to this Facebook group. That couch had been through three kids and one dog, and we still got a good amount for it. It definitely proves you can get cash for stuff that you hardly use anymore.

7. Buy clothing in thrift or discount stores.

You can buy a shirt or blouse that sells in a retail store for $30, for just $4 in a thrift store, or a $40 pair of pants for $5. Thrift stores don't have the selection that retail stores have, but you can often come across the perfect item, sometimes barely used.

At a minimum, you can use thrift store shopping to supplement your regular retail shopping, and save a small fortune in the process. This can be an especially good strategy for buying children's clothing. Since kids outgrow clothes so quickly, thrift stores offer an opportunity to buy good quality clothes for low prices. And then you won't mind when they come home with ripped pant knees or shirts stained with red Kool-Aid.

If thrift stores aren't your thing, then take a look at discount stores like T.J. Maxx or Marshall's. I can remember buying a new tie for a wedding at Macy's for $40 only to find the exact same tie at Marshall's a few weeks later for half the price! That's when I knew that anytime I needed a new tie, dress shirt, polo or shorts, I would visit one of these places first.

Just recently, I snagged a pair of cargo shorts for $25 that I saw in a department store for $60 a few days later.

8. Never buy new what you can get secondhand.

Just as you should sell what ever you no longer use, others are doing the same all the time. Before you make a major purchase, first look into garage sales and estate sales in your area. You'll be surprised at the stuff people are looking to unload.

Also, become a regular surfer on Craigslist -- it's like a perpetual garage sale where people are looking to sell anything you can imagine. Best of all, all prices are fully negotiable! Take advantage wherever and whenever you can. You'll begin to realize that there's practically nothing you need to buy new again.

9. You probably don't need a new car -- ever.

People often get on the new car treadmill early in life, then park there forever. But that's an expensive way to live. New cars have the following premiums, and the sooner you can rid your life of them, the more money you'll have:

  • The Depreciation Factor. New car values drop like a rock right after you drive them off the dealer lot, and keep dropping for the first few years.
  • A permanent car payment. Few people can afford to pay cash for a new car, and that brings a monthly payment into the mix. If you're replacing your car every few years with a new one, you probably never go very long without a payment.
  • Higher auto insurance and ad valorem taxes.
  • More interaction with dealer repair shops, which are about twice the cost of an independent mechanic.
  • Sunk capital. A brand-new $30,000 car is holding a lot more of your cash than a $5,000 used car.

Buy a used car for a few thousand dollars -- or not more than you have in your bank account. The repairs will cost less than the annual outlay you'll make for monthly payments on a new car. And the less money you need to put into your car, the more you'll have to put into your bank account.

10. Avoid being over-insured.

It's virtually impossible to insure against every potential risk, and you can go broke trying. For example, you don't need prescription drug coverage if all you ever need is an occasional antibiotic. Pay cash when you need a prescription, and lower your health insurance premium.

You also don't need $1 million of life insurance if you make only $50,000 per year. Be sure that any insurance coverage you have roughly matches the reasonable possibility of a negative outcome.

11. Give the gift of time.

We often give gifts to people who we can't spend time with, either for a birthday or at the holidays. If time is less expensive than a gift, plan to spend some with the person or people you want to give something to. An outing, a lunch, a dinner or even a quick cup of coffee could be worth more to a person than a physical gift. It also works wonders for building up relationships.

12. Buy when everyone else is selling.

This concept should have universal application in your life. It can apply to investing -- ie, buying after a market sell-off, so you can pick up investment bargains. But it can also apply to just about anything you might buy.

For example, since retail sales typically fall off in January, nearly everything goes on sale. Plan on doing the bulk of your buying in January rather than November and December.

This also has strong seasonal application. For example, buy your winter clothing in late winter or early spring, when winter items go on clearance.

13. Take better care of your health.

We all understand the importance of taking better care of your health as it relates to overall health and longevity, but it also has important financial considerations. By taking better care yourself, you'll spend less on dealing with the fallout of common illnesses like cold and flu. You can save even more by avoiding controllable health conditions related to inactivity, obesity, smoking and other dangerous behaviors.

Still another health-related factor is energy level. The better you feel, the more productive you'll be, and that usually translates to more productivity on the job or in your business. Health and energy level are often closely correlated to income.

14. Shop with cash or debit cards, not with credit cards.

Yes, there are rewards programs that work in your favor with some credit cards, but credit cards also hold the potential of being used as an extension of your paycheck. That's what happens anytime you allow a balance to slide from one month to the next.

When you do that, you're adding interest to the cost of what ever you purchased, potentially wiping out any rewards-based savings. With cash and debit cards, you're paying "cash on the barrel" and there's no chance of getting into debt. That reality will also prevent the possibility of spending more money than you have.

15. Save a minimum of 20% of your net pay.

With all the money you will save from the previous 14 tips, you should be able to save up some money! This isn't just about having money for it's own sake -- it's about eliminating the panic factor that often causes you to spend more money than you need to.

When you have options, you will have time to shop for the best deals, and when you find them, you'll be able to pay for them. Having money enables you to save money in a way that living hand-to-mouth never can. It takes you out of the state of crisis management, and gives you control over your circumstances. And that's what you need to have in order to properly care for your family.

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Contributor

Jeff Rose is a Certified Financial Planner™ professional, CEO and Founder of Alliance Wealth Management, LLC, an investment advisory firm. He is also an Iraqi combat veteran having served in the Army National Guard for 9 years, including a 16-month deployment to Iraq in 2005. He is the founder of GoodFinancialCents.com (a top 25 finance blog according to Wisebread.com) and author of Soldier of Finance, a book that combines his military background with his financial planning knowledge.

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