subject: Budgets and Your Personal Finances [print this page] The financial crisis of the past two years has hit many households where it hurts most - the wallet. Money has become tight and for an unfortunate many jobs have disappeared. Making ends meet these days has become a challenge. If your home finances are in disarray; and the ability to plan your future well-being is on the back burner, you'll find yourself building more stress in your life than is necessary.
The best way to face your financial challenges is to meet them head-on - with a budget. The days of operating a household without knowing where you spend your hard earned cash are gone. So, let's sit down and make plans that will help you organize, prioritize, and meet important financial goals.
Knowing where you spend your money is important. Let's gather a few things together and see exactly where your money goes.
In order to meet this goal you will need to keep a receipt for every purchase you make. Receipts for groceries, home repairs, doctor visits, incidental spending, and everything else, will need to be kept and listed.
All your fixed bills will also need to be recorded. These include the phone bill, water bills, electric bills, medical insurance bills, rent, mortgages, etc.
If you have a checking account and use a debit card in conjunction with your checks you can print your last three months of statements and get to work immediately without the hassle of building a list from scratch.
Planning is an essential part of developing a simple budget. You can use a paper spreadsheet or one on your computer if you have one. Assuming you are using a computer, you'll be making several columns.
List your income for the month. Start the first column on the left hand side. Don't forget to include child support, and other sources of income. Make a category for each income item, i.e., Bill's pay, Sally's pay, and child support. In column two list your actual income for each category.
Expenses are next. In the same row under your income column list your expense categories, making one for each fixed expense; i.e. a line for electric, phone, water, and so on. The next column will contain the amount spent for each of your fixed items. Example: in this column you'll place $52 next to electric, as that is the average amount you spent on electric over the past three months. Complete this line item for each fixed category.
Next take a look at your other expenses tallying the amount you spent for each category over the last three months. Example: You ate out, ordered pizzas one night a month, and bought lunch four times a month instead of carrying your lunch. Your monthly average totals forty one dollars. Place $41 dollars in your dining-out column for a budgeted amount.
Example two: You had to purchase a new faucet for the kitchen and make minor repairs around the house. In three months you spent $83, for an average of $28 a month. Place that figure in column two next to home repairs.
Try not to make a miscellaneous column, as this catch-all column has the tendency to grow out of control. Instead, take the time to list the expenses in a category, no matter how small the items listed are. Clothing, pet food, vet costs, and other discretionary spending should each have their own category.
Don't forget to plan for upcoming birthdays, a gift category. If you pay your property taxes separate from your mortgage make a category for it in the fixed expense section. Likewise make a category for car insurance in your fixed expenses whether you pay yearly, quarterly, or monthly. Other category items to remember may include school supplies and entertainment items such as movie rentals, book purchases, and even the newspaper.
The goal is to capture all you expenses, a must if you are serious about planning to meet your expenses with a limited budget. When your spending money is listed is it simplified and you can more easily keep track of where your money goes.
If your home finances are being stretched thin, it is more important than ever to set a budget and stick to it. Realize this may be much easier said than done. Especially since your next step will be to prioritize your spending.
It's not easy to prioritize spending, but seeing it in red, white, and black makes it a little clearer. You'll find there is more at work here than just number crunching.
Next, subtract your expenses from your income. If you find you are spending more than you are earning, it's time to trim the expense column.
Items to cut may include lunches, entertainment, and groceries. Even fixed items can be trimmed. How? We'll explore them in the next posting.
Budgets and Your Personal Finances
By: Rich
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