October 23, 2019

CENTS AND SENSIBILITY

Creating a household budget is hardly a fun exercise, but it is necessary, especially in these economic times . . . it can also be an excellent family project to help every member understand your options.  Determining where monthly income goes can help rein in over-spending habits and create fiscally friendly ones.

To start, financial planners suggest you gather a year’s worth of bills and loan payments to create a complete picture of your expenses.  Make a list and assign each to a category (the Quicken computer program can be of amazing help with this aspect).  Be sure to note when your spending increases throughout the year, such as around holidays or annual vacations.

 Next, determine fixed and variable expenses.  Fixed expenses have little or no change each months (mortgage, car payments, cable bills).  Variable expenses change monthly (groceries, gas or personal expenses such as morning coffee runs),

 Once you have sorted your expenses and calculated a monthly average, figure out your total monthly income (all sources of revenue).  Ideally your expenses should not be greater than your income!  Your ultimate goal is to create a “zero-dollar budget” to see exactly where each dollar of your income goes.  The money left over should be put into savings accounts or used to pay down credit card debts.

 When you are through with this exercise, look for ways to build up your emergency fund.  Consider putting aside enough for three to six months’ living expenses.