Applying that principle, you can “calculate the expense” of living within your means if you create a budget. How does it work? Try this:

When you bring home your earnings, designate specific amounts to be put in separate categories to care for present or future expenses. (See box on page 8.) When your expenses are organized, you can see where your money is going and how much is being spent on nonessentials. That, in turn, will help you to determine where you can cut back.

To develop a budget that works for you, put into practice the following suggestions.

Shop Wisely

When Raúl lost his job, his wife, Bertha, changed her method of shopping. “I looked for discount coupons and grocery store specials that offered two items for the price of one,” she says. Here are some other ideas:

● Plan your weekly menu around what is on sale.

● Buy basic ingredients instead of prepackaged foods, and cook from scratch.

● Stock up on items that are on sale or in season.

● Buy in bulk, but be careful not to overstock items that will eventually spoil.

● Slash clothing costs by purchasing quality used garments at resale stores.

● Travel to areas where prices are known to be lower, if this is cost-effective.

● Cut back on how often you shop.a

Put It on Paper

“We had to have a budget,” says Fred, “so I kept a record of what we needed to pay out immediately and what we needed to have on hand for the rest of the month.” Adele, his wife, adds: “I knew exactly how much I could spend when I went to the market. At times when I needed to buy something for the kids or the house, I would look at the budget and think, ‘I can’t afford it, so we’ll have to wait until next month.’ Having a written record was the key!”

Before Buying, Think

Get into the habit of asking yourself: ‘Do I really need this? Is the old item actually worn out, or do I just want something new?’ If you will rarely use an item, would renting one suffice? Or if you anticipate using it frequently, would buying a good used one work just as well?

While some of the above measures may seem insignificant, they can add up! The point is, by establishing a pattern of saving with little things, you will do the same when faced with large expenses.

Be Resourceful

To cut down on nonessentials, get creative. For example, Adele relates: “We had two cars but quickly got rid of one and carpooled. To save on gas, we planned as many errands as possible with each trip. We trimmed down to the essentials.” The following are some other ways you can be resourceful:

● Plant a garden and grow your own vegetables.

● Follow manufacturer’s maintenance instructions, which may prolong the life of your appliances.

● Change out of your good clothing as soon as you come home​—a practice that will keep them looking new longer.

[Box/​Chart on page 8]

How to Develop a Budget

(1) Write down your essential monthly expenses. Keep a record for one full month of all that you spend on food, housing (rent or mortgage), utility bills, car expenses, and the like. For bills that are paid annually, divide by 12 for the monthly amount.

(2) Organize expenses into categories. These include food, housing, automobile and travel costs, and so forth.

(3) Figure out how much of your savings must be applied monthly to each category. With bills paid annually, you must “calculate” how much needs to be put aside each month.

(4) Write down the combined net earnings of all in your household. Subtract deductions such as taxes. Compare this with the expenses.

(5) Set aside monthly the amount needed to satisfy each category. If using cash, a simple way is to mark envelopes for each category. Then periodically place cash in the appropriate envelope needed to cover the designated expense.

Caution: If you use a credit card, do so responsibly! Many a budget plan has been ruined by the temptation to ‘buy now, pay later.’

[Chart]

(For fully formatted text, see publication)

Net Monthly Income

NET MONTHLY WAGES $․․․․․ OTHER $․․․․․

$․․․․․

$․․․․․ Rent or Mortgage $․․․․․

$․․․․․ Insurance/​Taxes $․․․․․

$․․․․․ Utility Bills $․․․․․

$․․․․․ Automotive $․․․․․

$․․․․․ Entertainment/​Travel $․․․․․

$․․․․․ Phone $․․․․․

$․․․․․ Food $․․․․․

$․․․․․ Other $․․․․․

BUDGETED TOTAL ACTUAL TOTAL

$․․․․․ $․․․․․

Compare Income & Expenses

NET MONTHLY INCOME $․․․․․

MINUS− BALANCE

MONTHLY EXPENSES $․․․․․ $․․․․․