Budgeting Success

The idea of creating a budget can be intimidating until you realize that you have essentially worked with one since you were old enough to have spending money in your pocket. The difference now is that you need to be more exact in knowing what’s coming in and what’s going out.

Three-Step Solution
The key to any successful budget is keeping a written record. You not only need to see how much money you earn each month, but how much you pay out and where exactly it’s all going.

Step 1: Write down what you earn. This is the amount you bring home after taxes and any other automatic deductions. Also write down any income that comes from sources like alimony or dividends. If your earnings fluctuate, determine a monthly average (total annual earnings divided by 12) and use that number.

Step 2: Write down what you spend. This is where it gets more challenging. Start by listing all the bills you must pay: fixed expenses like your mortgage/rent, car payment and cable bill as well as an average for expenses like utilities and groceries that fluctuate month to month. Also be sure to include any bills you pay bi-monthly or quarterly, like insurance or water, by determining their monthly breakdown (i.e. a $120 quarterly water bill equals $40 per month).

Calculate

Step 3: Write down what you don’t realize you’re spending. Each one of us has miscellaneous expenses that are so ingrained in our daily lives that we don’t realize their expense. Our favorite magazines, the morning java fix, gas for the car…they all add up. Other expenses are more noticeable but we often don’t give them a second thought: new clothes, haircuts, casino junkets. By writing it all down and tracking the total amount you spend over weeks or months, you’ll get a much clearer image of where your money is going.

One tip for tracking these miscellaneous expenses: always get a receipt. It’s easier and more accurate than carrying around a notebook and pen for recording all the little expenses that add up each week.

Of course, the goal in all of this is to make sure you’re earning more each month than you’re spending. Once you have your income and expenses figured out, you’ll have a solid starting point for defining areas in which you can cut back or spend more wisely.

Help is Available
There are a number of personal finance software programs on the market as well as online tools that help manage your budgeting and saving goals. FinanceWorks™ is one of the latest. It allows you to manage all your financial accounts — checking, savings, loans and credit cards — in one place with a single login so you can more easily budget and gain control over your spending. The program is available for free through select financial institutions, including Johnson Bank. Check with your banking specialist for details.