Purdue News

December 17, 2001 Ring in the new year with a budget resolution WEST LAFAYETTE, Ind. – Due to the current economic slowdown, many are facing difficult financial situations. But a Purdue University expert says the first of the year provides an opportunity to critique how you handle your finances and develop a strategy to become a more informed consumer. "Handling financial situations can be challenging at anytime; however, it is best to face the problems and work toward a solution rather than worry about it or ignore it," says Elizabeth Kiss, Extension specialist and assistant professor of consumer sciences and retailing. "There are common resource saving ideas that sometimes get overlooked that can be used during instances like these." Kiss says the best way to approach the new year is with a spending plan. Start by adding up total net income from all sources last year. Include income from other household members if used for shared expenses, she says. Use this amount to plan a proposed budget on a month-to-month basis, noting when the money comes in and how you anticipate spending it, Kiss says. An example of a budgeting worksheet is included in Purdue Extension publication CFS 704-5 titled "Setting priorities for spending,". Each month consumers have fixed expenses such as rent or a house payment, car payment and payroll deductions for retirement, health or life insurance. There also are flexible expenses for food, clothing, personal items and entertainment. She says it is easiest to decrease and control the flexible expenses in a budget. Even small things, like setting the thermostat back five to 10 degrees at night, helps. Cutting back a little in some places can make a difference, Kiss says. "You also could plug any spending leaks, which are small purchases that have become habits, and any unplanned spending," she says. "Taking your lunch a few days each week instead of going out to eat every day can free up between $10 to $15 a week." Changing grocery shopping habits can save money as well, Kiss says. She recommends making a list before going to the store and shopping alone so you focus only on what is needed. It also is good to comparison shop and take advantage of sales. "You do not have to go on a crash diet to save money on your food bill," Kiss says. "Make conscious decisions about how you spend money on groceries. If it is on sale, buy it if you will use it, otherwise pass." Entertainment is another place where expenses can be cut. Kiss suggests taking advantage of community resources, such as the library where you can check out videos rather than rent them or pay to see a movie in the theater. Free and low-cost entertainment and recreation programs within the community are other cost-saving options. "You cannot cut entertainment completely out of your budget," Kiss says. "You have to have some money for fun otherwise your plan will not work." Another way to utilize resources is by using things you already have or putting them to another use. Go through closets at home and pull out the clothes you do not need or wear. "You may find items you forgot about that you can use now," Kiss says. "Or, you may decide to sell these clothes to a resale store for a little extra income." Kiss also suggests coordinating schedules with friends and family to stretch your resources. Carpool or ride the bus to help with transportation costs. Plan trips with others to reduce gas and maintenance costs on your vehicle. Coordinate with family and friends to share babysitting duties. After the holidays it can be challenging to get back on track financially, regardless of the other ways you save throughout the year. However, Kiss recommends continuing to pay at least the minimum balance on credit cards each month. "The sooner you mail in your credit card payment the better," Kiss says. "If you can make the payment before the due date, it cuts down on the interest you pay on the total balance over time." And it is not too early to start thinking about the holidays for next year, Kiss says. Saving small amounts through the year in a Christmas club account or savings account helps you budget all year long for the holidays. Writer: Jennifer Doup, (765) 494-6682, jdoup@aes.purdue.edu Source: Elizabeth Kiss, (765) 494-8299, kisse@cfs.purdue.edu Ag Communications: (765) 494-2722; Beth Forbes, bforbes@aes.purdue.edu; https://www.agriculture.purdue.edu/AgComm/public/agnews/ Related Web site: Purdue Extension, "Living on Less". Purdue News Service: (765) 494-2096; purduenews@purdue.edu To the Purdue News and Photos Page