Why do I need a budget? Part 2

Today’s column continues our series of up-to-date tips and reports which will help a family prepare a reasonable, affordable financial plan with a goal of achieving financial freedom.

In the last column, Why Do I Need a Budget (Part One), we addressed the effectiveness of a budget as a first step in starting to take control of you financial situation. We discussed the first two of four steps in preparing a budget: keeping track of your daily spending and determining what your monthly income and expenses are the month before they are due. Today we will look at the other two steps you need in developing your budget: finding ways to decrease spending and finding ways to increase income.

Step 3: Find ways to decrease spending – If your expenses are more than your income or if you want to save more money, you need to consider ways to cut back on your spending. As you decrease your monthly spending, you will increase the amount of money you have left each month. This is also referred to as “increasing your cash flow.”


  • Carry only small amounts of cash in your wallet so you will not spend it.
  • Use direct deposit for your paycheck or federal benefits, such as Social Security (see “Myths and Facts about Direct Deposit” in the next paragraph).
  • Control your use of credit cards.
  • Do not go shopping just for fun.
  • Take your written savings goals with you as a reminder.
  • Buy only what you need – do not buy things just because they are on sale.
  • Use coupons to save money.
  • Use a grocery-shopping list to prevent impulse buying.
  • Take your lunch to work instead of eating out.
  • Shop around to get the best deal on big-ticket items such as cars and appliances.
  • Pay your bills on time to avoid late fees, utilities being turned off, eviction, repossessions, and the costs of a bad credit rating.

DIRECT DEPOSIT: MYTH VS. FACTS – Using direct deposit for your paycheck and state or federal benefits is safer and easier than using paper checks. Below, the Federal Deposit Insurance Corporation (FDIC) addressed some common misconceptions about direct deposit and provided the facts.

MYTH: Receiving paychecks or benefit payments in the form of a paper check gives you more control over your money because you can deposit it at your bank or credit union when it is convenient for you.

FACT: With direct deposit your money goes into your account at the same time each month, eliminating the risk of stolen checks and forgeries and helping protect you from identity theft.

MYTH: Switching to direct deposit is time-consuming and a hassle.

FACT: Enrolling in direct deposit is usually fast and easy, whether you receive a paycheck or a government benefit. You can sign up through your employer or at your local bank or credit union.

MYTH: People who do not have a bank account should not consider direct deposit.

FACT: There are options available if you have not yet signed up for an account. There are banks and credit unions that offer low- or no-cost accounts.

MYTH: If you use direct deposit, you will not know when your money is in your account.

FACT: You can be sure your money is in your account by the time your bank opens payment day. Paper checks can get lost or stolen, but with direct deposit your money is in your account on time, every time.

MYTH: Direct deposit does not really save time because the check still must be mailed to the bank.

FACT: With direct deposit, your paycheck or federal benefit payment is electronically transferred to your bank account. The payment process is completely paperless.

MYTH: Direct deposit is not a trustworthy way to receive federal benefits payments.

FACT: Direct deposit is completely reliable. You are 30 times more likely to have a problem with your federal benefit check than with your direct deposit payment.

MYTH: Direct deposit is expensive.

FACT: Most banks and credit unions do not charge you to sign up for direct deposit. In fact, they may waive your monthly checking account fee if you have direct deposit.

Step 4: Find ways to increase income – In addition to increasing your income by cutting expenses, there are a number of tax credits that may help to increase your income. These include: Earned Income Tax Credit (EITC); Child Tax Credit (CTC); Education credits; and tax credits for retirement savings contributions. Although the tax filing season has just ended, it is always important to learn about these tax credits and to find out if you are eligible for any of them.

We will discuss budgeting considerations in the next column. For more information, visit us on the web at www.nhsfl.org or stop by at 1600 Dr. Martin Luther King Jr. St. S., St. Petersburg.

NHS is a 501(c) 3 non-profit HUD-certified housing counseling organization. All services are provided free of charge. Partners include the U. S. Department of Housing and Urban Development (HUD), HomeFree USA, Florida Housing Finance Corporation, Florida Hardest-Hit Fund, Pinellas County Community Development and the City of St. Petersburg. The source for this article was the Federal Deposit Insurance Corporation’s Money Smart program.

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