An effective squeeze budget is one of the best ways to save for a volunteer trip. To help in this tutorial, we will create our own person (Bill Gibson) and apply the rules and techniques of squeeze budgeting as they are explained.
The theory behind squeeze budgeting is to tighten your financal spending enough to “squeeze” out money that would otherwise be wasted on frivolous spending. This is done by recording, analyzing and limiting your spending to a point tight enough to produce extra money every week but loose enough to have a minimal impact on your life.
Step by Step:
1. List all expenses for a typical week (Remember, generally spending increases in December and decreases in January/February). By dividing your budget by the week instead of the month you can easily monitor your spending mentally throughout the week.
Bill Gibson Pre Budget Weekly Expenses:
Food: $150
Transport (Commute, Gas, etc...): $100
Rent: $250 (weekly)
Fun (Shopping, Eating Out, Movies, etc...): $600
Insurance (Car, Home): $250
Education (Field Trips, School Supplies): $50
Volunteer Trip: $0
Total: $1400/week
Note: Your expenses will be completely different; Bill Gibson is only to be used as an example.
2. List all your incomes; this includes pensions, bonus pay, dividends and interest, alimony or child support, public assistance, and salaries. Remember to divide up income by the week.
Bill Gibson's Weekly Income:
Mr. Gilson: $1400
Note: For the sake of simplicity, Bill Gibson's income matches his expenses and does not take into account taxes. Your own expenses and incomes will be more complex, however the theories will remain the same.
3. Make a budget. List all your expenses again on a separate sheet of paper, pick four expenses and subtract 5% from each. This is how you will actually acquire your money for the volunteer trip, by “squeezing” it out of your existing expenses. You can only squeeze money out of expenses which are not fixed, such as fun, transport, and food. Fixed expenses such as rent and insurance cannot be lowered.
Bill Gibson Pre Budget Weekly Expenses:
Food: $150 -5%
Transport (Commute, Gas, etc...): $100 -5%
Rent: $250 (weekly)
Fun (Shopping, Eating Out, Movies, etc...): $600 -5%
Insurance (Car, Home): $250
Education (Field Trips, School Supplies): $50 -5%
Volunteer Trip: $0
Total: $1400/week
After subtracting 5% we can see the results:
Food: Saved $7.50/week
Transport: Saved $5.00/week
Fun: Saved $30/week
Education: Saved $2.5/week
Add this money into your volunteer trip savings every week. As you can see, Bill Gibson adds $45 to his trip savings every week.
Conclusion
The beauty of this system is that the impact is minimal. Spending $30 less on “fun” each week might only mean renting a movie instead of going to the movies or making your own coffee instead of Starbucks every morning. The most important thing is to always be conscience of how much you are spending and if you can acceptable spend less. When in a restaurant, could you have water instead of beer or salad instead of steak?
Remember to maintain flexibility in your budget. If one week you end up spending $100 over your budget on fun, compensate by spending less on food this week or spending less on fun next week.
Keep records of your spending. Information is the key to maintaining a budget, by keeping an accurate account of your spending you can see where it is too high and where you can save more.
Gilson's budget saved them $45 a week, resulting in $2340 in a year, definitely enough to volunteer abroad.
