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July 28, 2010

So you’ve decided, for whatever reason, that you need to seriously evaluate your income versus your expenditures.  A great place to start is to identify your financial goals, both short and long term, for example, this month, 6 months, 1-year and 5 years.  Many planners suggest making longer-term goals than 5 years, but if this is your first attempt at budgeting that may be overwhelming.

If you have pay stubs or if you are readily aware of your monthly income, identify that first.  Next you will need to go down the list of items that will be deducted from your income.

My list includes: mortgage, utilities (home phone/internet, cell phone, natural gas, electric, water), home maintenance/improvements/furniture (annual a/c and heating checks too), vehicles (payment if you have one, maintenance, and gas), food (groceries and eating out expenses), personal (hair cuts, mani/pedis, clothing and shoes), children’s activities, civic organizations (LLL and TORCH), tithe, medical (co-pays, dental, prescriptions), and savings.  Our trash service is escrowed in our mortgage payment and we are on septic so we have no sewer bill.  Other items that tend to slip through the cracks, as they are irregular expenses, include vehicle tags, emissions and taxes, auto insurance, jewelry insurance, safe deposit box, life and disability insurance, credit card or other debt payments, 1040 ES payments (estimated withholding), accountant expense, gifts, and pet related expenditures.

You may not have all these categories and you may have some additional ones that are not listed, take tolls for instance if you commute in an area that has toll roads.  The key to budgeting is to know where your money is going and then trying to reduce unnecessary expenditures in such a way that you are able to live comfortably (provided your income meets or exceeds your expenditures without unnecessary credit card or debt use) while still accumulating savings for the future.

If you use a Microsoft based platform, excel does a fine job and is free.  There are many free budgeting software programs online; I’ve tried a few including Mvelopes and Mint but neither worked out long term for me.  Keeping up with and reconciling your checking, savings and debt statements monthly is a good way to see where your money is going.  If you spend a lot of cash, try keeping a month or two worth of receipts if you feel as though at the end of the month you’re left with nothing so you can have some idea as to where you are spending your money.


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