Budgeting Part 2: Deciding where your money goes

You've written down all of the places your money goes each month - including all of the extras - down to the last dollar. You've written down your income (including any government assistance, retirement income, disability, etc). If you're like most Americans you have at this point come to a shocking realization:

The numbers don't match.

Now what?

Because of credit cards, borrowing programs, the leniency of certain companies (they don't shut your water off if you don't pay for just one month), and a lack of money consciousness, most Americans find that they actually aren't paying all of their bills each month. Or they are, and they're racking up credit card debt one extra at a time. If you're trying to get yourself financially healthy, this can be a depressing realization. Don't lose hope! Now it's time to trim the financial fat.

It's important that your priorities come into play here. It's the only way to see where the fat actually is so you can trim it. For example, our food budget is a little bit high for a family of two. Our business mentor feels that we shouldn't be spending so much money on food and if there was one place he could pick to trim the fat, it would be our grocery bill. However, the choices that we are making in this area are because of where our priorities lie. On top of our commitment to be healthier - starting with losing weight - my husband has some major health challenges that are greatly affected by what foods we eat. Our grocery bill is expensive, but if he eats something that interacts poorly with his body, he's unable to work for days and days. That's easily more expensive than our groceries after just one day, and it jeopardizes our ability to pay other bills. For that reason, our grocery bill doesn't get touched when we're trimming the fat.

Does this mean I spend willy-nilly from the grocery bill? No, absolutely not. It means that I maintain the knowledge that our groceries will, on average, cost more than another family's groceries might. Still, I do my best (and am constantly learning to do better) at being wise with our expenditures. I stock up when it's appropriate and will save us money in the month, I choose which vegetables we eat in a given week based first on the list of foods we eat from right now and second on which ones are most cost effective for the week. If you have an area of your budget that is especially high as compared to a 'normal' family, it becomes especially important that you don't let that line item get bloated.

Where is your financial fat? Maybe because of where your priorities lie and where you are financially right now, you do need to cut out those morning coffees. Or maybe you need to start carpooling to work to cut down on the gas bill. Wherever you have room to make a small change that will create a big difference, do so. This is the part where you take control of your life and finances by deciding where your money is going to go instead of letting it decide for itself.

This won't be easy! I can tell you that I am very emotionally attached to my morning coffee being made from Starbucks coffee grounds! But when you're in a position where fat trimming is necessary, sacrifices have to be made. Trust me, the benefits to your life are right on par with the price you'll pay to get there. If you can trim the fat now, you'll enjoy your leaned out and high-performing life later.