Keeping Track:

There is only so much money per pay period. Question: where does it all go?

A good portion of your money pays for housing, food and basic living. Another portion pays for transportation. But where does the rest go?

Budgeting allows you to track your monthly expenditures so that you can plan key savings strategies for important short- and long-term goals.

Limits Your Spending:

Having a financial budget may find that about 5-10% of your total spending may be for purchases that are not needed.

Think about it. What could you do with that extra 5-10%? Perhaps your future plans include buying your first home, going back to school, saving for your child's college, paying down debt or simply setting aside cash for a special trip.

A budget will identify expenses that can be cut so that you can set goals on making important long-term savings.

Discipline Yourself:

Your goal is to rid yourself of instant gratification (the symptom of credit card use). The budget sets guidelines on what and when items can be purchased.

Setting Goals:

Budgeting supports your financial goals, which may include:

— saving for your first home
— paying down debt
— preparing to go back to school
— planning for retirement

Good budgeting skills add these goals into the budget.

Prepare for Emergencies:

Question: if you were to lose your job, how long could you survive on available funds?

If you had to stretch those funds, what reductions can you make in your existing monthly expenses?

That is the key benefit of a budget. It helps prepare for emergencies with established expense reduction plans.

Your budget "cash in-flows" needs to be greater than your budget "cash out-flows"

Income:

The budget starts with how much money you bring home on a monthly basis. Income sources include:

— employment income
— alimony received
— investment income
— social security
— support payments
— savings

How much income should be allocated for the budget?

— your goal should be around 90-98% or less
— the remaining 2-10% of your income gets allocated for savings

(note: budget items are expressed in monthly terms)

link to our budget worksheet (excel file) to estimate income

Housing Expenses:

Housing expenses will likely be your largest expense item, especially if you own a home. Housing expenses include:

— your mortgage payment with escrow (taxes, insurance)
— monthly rental payment if you do not own
— utility services (electric, gas, oil, water, sewage, garbage, etc.)
— telephone, internet, cable
— house repairs and maintenance

How much for the budget?

— about 32-35% of income if you own; 15-20% if you rent

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate housing expenses

Transportation:

Transportation expenses include:

— auto loan payments
— auto insurance
— fuel expenses
— maintenance and repairs
— taxes, licensing
— parking
— public transportation

How much for the budget?

— about 9-12% of income

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate transportation costs

Family or Personal Care:

Family care expenses include:

— family care insurance (health, disability, life, dental, other care)
— doctor, dental, eye care, hospital visits
— veterinarian expenses
— prescriptions and over-the-counter medications
— child care
— elder care
— health clubs

How much for the budget?

— about 8-19% of income; 15-25% for full child/elder care services

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate personal care expenses

Living Expenses:

Home living expenses include:

— food
— home living supplies
— school and work lunches
— snacks, vendors
— clothing
— education-related expenses
— home services (cleaning, gardening)
— postage and paper supplies

How much for the budget?

— about 27-35% of income

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate your living expenses

Family Recreation:

Recreation expenses include:

— dining out
— movies out and rentals
— outside entertainment
— cigarettes, beer, wine, liquor
— birthdays and holidays
— vacation travel
— weekend, day trips
— gambling, lottery tickets

How much for the budget?

— about 4-6% of income

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate recreation expenses

Obligations:

Obligation expenses include:

— credit card payments
— student loan payments
— home equity line or loan payments
— personal loan payments
— alimony, child support payments
— judgment or liens
— other assessed taxes
— charitable donations

How much for the budget?

— about 18-28% of income (your goal is to reduce this percentage)

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate your obligations

Savings:

Savings include:

— 401K contributions
— IRA contributions
— investments
— savings (personal, college, retirement)

How much for the budget?

— about 2-10% of income (goal is to increase this percentage)

(note: budget percentages can vary by region and situation)

link to our budget worksheet (excel file) to estimate your saving needs