How To Budget For Your Finances

With the world economy in a crisis situation at the moment let`s look at what can be done for individuals to help get by.

Creating a Budget

First, work out your average monthly income. (Most have found that the monthly basis is the easiest to work with.) To do this, you have to add up all the incomes of all wage earners in your family: salaries, interest, tax rebates and other sources of cash to you. Subtract any deductions made for income tax and other purposes. If any of the income is earned weekly, multiply by four and a third. That gives you an approximate monthly figure. Now add them up. That is what you can spend each month-no more!

Next, add up all your recurring bills: rent or mortgage payments, lighting and heating, telephone, and so forth. Since most of these bills come in each month, you can see why there is value in calculating your income on a monthly basis. Remember to include such items as food, beverages, newspapers and other things for which you probably pay cash each week. Now, have you added up everything? What about average expenditure for clothing? trips and vacations? entertainment? home repairs and upkeep? dry cleaning? These are items often overlooked.

There are some bills that come due once a year, such as taxes, automobile license plates and insurance. Divide these by 12 to get a monthly figure. At this point, what total expenses do you have for a month?

The Value to You

Now you are at the point where you can compare the figure for your monthly income with the one for your expenses. What do you see? If you have enough to cover your bills, that is fine. But do not abandon your budget at this point! For one thing, there would be wisdom not only in setting aside needed funds for monthly costs but also in saving for the unforeseen expenses that will come along during the year. Things will wear out or break down. Allow for these.

But take a look at other expenses. What are you spending on alcoholic beverages? Others watch their paychecks go up in smoke. One person, smoking two packs a day, can easily spend $1,000 or more a year on cigarettes. Some have adopted the practice of eating at a restaurant once a week, but that can cost some families a sizable chunk out of a week's salary. That same meat or seafood delicacy could be purchased for much less and enjoyed at home-with additional savings on gasoline, tips and parking. Could you use another $3,000 or more a year? That is what might be saved in these areas alone. Obviously, there are other ways of cutting back on expenditures, so it`s important to be realistic about your outgoings.

It`s only by knowing your precise income and expenditure through use of a budget that you`ll be better able to balance your housekeeping books.