As an only child growing up with a single-mother, I picked up a few valuable budgeting tools from her lead. While my mother was no financial genius, she knew how to stretch a dollar. Even before certain budgeting tools were brought to large public awareness through the internet, my mother was utilizing them to make the most of our modest income. And in effect, through her example, I carried some of these same tools into my financial life as an adult, sometimes expanding or improving upon them in my own way.
A reserve fund is critical
Whether single or married, a reserve or emergency fund can be critical. Of course, growing up with a single parent, that fund was even more important since my mother was financially footing the majority of our bills.
While my own family’s reserve fund now rises and falls with things such as births of babies, relocations, and car or home repairs, we try to keep our fund level at around $5,000. While this might seem a little high, it’s still not the 8 months of emergency fund that Suze Orman advocates or that we’d really like to have in place one day.
Tracking costs is more than just a budgeting tool
I still remember in high school when my mother showed me her expense ledger book. She was tracking our purchases and regular expenses, and frankly I was somewhat amazed that she was doing this since I never considered her all that financially savvy. However, her example stuck with me, and I adopted the same strategy as I moved into my college years since I was responsible for a significant portion of my college costs.
Not only is tracking our expenses a great way to stay informed of where our money is going, but it’s a good way to look for areas and ways to cut costs. From utilities and home costs, to kids and food, drilling down on costs has saved us thousands, if not tens of thousands of dollars over the years. It’s helped us cut utility costs by 30 percent year over year, food costs by a similar amount, and limit our annual clothing budget for our family of four to under $400.
Cash doesn’t have to be in an envelope for the “envelope system” to work
My mother used the envelope system – you know, putting cash into separate envelopes for things like food, utilities, gas, entertainment, etc. – to help her budget. And while I’ve adopted a similar sort of strategy, I’ve found that I don’t have to literally put the cash into envelopes.
Instead, I’ve refined the method while keeping its overall purpose in place. Rather than using actual physical envelopes and cash, I use a spreadsheet upon which I track income and expenses. I break out individual cost areas – utilities, food and entertainment, transportation — and assign specific dollar amounts to them. Then as I move throughout the month, spending money on these related items, I add the expense while at the same time decreasing the amount in my “virtual” envelope. This gives me an overall idea of where I am with these expenses moving forward through the month, and it actually works better for me since rather than a bundle of bills in an envelope I have the exact amount left to spend right there for me to see.
So while growing up with a single parent presented its challenges, it also provided certain benefits in the way of learning about personal finances.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.