Hi folks, this is the first article in Personal Finance category. So that’s our flying start.
First in PF (personal finance) nothing written will fit to all people. Everyone has a diferent thinking, methods, tools and goes. So here below in the diagram we show an example way to manage your cashflow and accounts.
Write down a list of all the expenses you expect to have this month. We’ve included a list of possible expenses below to prompt your memory. Be sure to include expenses unique to only this month. Do you have a friend or family birthday? Is your registration due? This step may actually unearth some expenses that you forgot about. If you think of expenses that are coming up but not in this month, that’s ok, just go ahead and write them down and we’ll deal with them a little later.
To be easy for you we are giving you a great PERSONAL MONTHLY BUDGET TEMPLATE (excell file - 97 or new version)
Income
- Paycheck 1
- Paycheck 2
- Other Income 1
- Other Income 2
Expenses
- Taxes (if using gross income or you are self employed)
- Mortgage Payment
- Second Mortgage payment
- Household (yard)
- Utilities: Gas
- Utilities: Elect/Water/ Gar
- Auto: Gas
- Auto: Insurance
- Auto: Maintenance
- Auto: Registration
- Satellite TV
- Life Insurance
- Debt reduction
- Babysitting
- Clothing
- Grocery
- Grocery: Eat Out
- Grocery: Eat Out
- Grocery: Nonfood
- Medical
- Hair cut/personal care items
- Charitable Donations
- Emergency Fund
- New car savings
- College Fund
- Dry Cleaning
- Gifts: Birthdays
- Gifts: Christmas
- Gifts: Holidays and Other
- Household: Maintenance
- Retirement Savings
- Magazine Subscriptions
- Entertainment: Dates
- Entertainment: Video rentals
- Personal money (1 for each individual)
- Cushion
You’ll probably miss an expense or two at first and find yourself part way through the month saying “shoot, I forgot to budget for that.” To address this scenario, be sure to budget a “unexpected” account. We recommend starting at about $100 at first. Over time, you’ll be able to get a feel if this is too much or not enough.
We are guessing that the vast majority of people will have allocated more expenses than they have income resulting in a negative difference. Don’t be discouraged! The first time we did this, reality hit us hard. We had to do a major evaluation of our priorities and really distinguish between our wants and needs.
You need to adjust your categories until your income equals your expenses (this is the hard part). This is where you will need to make some trade-offs between one category and another. This step is usually where the most conflict occurs between couples because it exposes their conflicting values. If things get too heated, it’s probably better to take a break and continue later. Just remember that this is your first budget and you will refine things as you go. You don’t have to feel locked in to the decisions you make now.
For many families this process will expose that they have been spending more than they make and can’t support their current lifestyle on existing income. It can be extremely hard to realize that lifestyle changes are in order, but at least you now know the truth and can fix your problem instead of going into more debt.
Here are some suggestions for adjusting your budget:
- Identify all your non-necessities. Yes, cable is a non-necessity.
- Each spouse should rank the non-necessities in terms of importance to them
- Eliminate or reduce those that both spouses agree are a low priority
Hopefully by eliminating or lowering the easier “consensus” items you will now be at a zero balance. If not, you will have to negotiate which categories are most important to each of you. You may have to make a lifestyle change by either earning more income or lowering your cost of living. In some cases, moving to a less expensive place may be in order. Housing is usually the largest expense and can make the biggest difference to your expenses.
We think that this article will help you a lot to reschedule your calendar. We will be glad to discuss if you have any problems and opinions.
