Setting Up Your Budget

In Dutch it’s “begroting,” in Spanish, “presupuesto,” and the Germans say “haushaltsplan” (which make the most sense, as in “How Shalt YOU plan?  In any language, we either love or hate the word and the idea of it.  But if you have no idea where your money goes, you are bound to end up in deep trouble.  Follow WIFE’s four simple steps below and join your fellow Money Stars on the path to Financial Freedom!

If you don’t know where your money goes, you’ll live and spend from day to day with no clear idea of how much money is moving in and out of your accounts. To help you figure it all out, follow the four simple steps below.

1. Create a worksheet so you can analyze where your money goes.
   In a blank notebook, list the budget categories that apply to you, one on each line, using the categories in the budget worksheet (see below) as a guide. Add budget categories that are uniquely yours; for example, if you are enrolled in school part time, you may have additional expenses for tuition payments, textbooks and supplies.
2. Figure out where your money has gone.
   Go through your checkbook and credit card statements for the past year and list each check or itemized credit card charge in its proper category. Add the amounts in each category, and you will have a summary of your spending by category for the past year.
3. Setting up your budget for the coming year.
   Decide where you can cut back, and by how much, and subtract the changes from the category totals. Divide the revised amounts by 12 to arrive at your preliminary monthly budget. Compare the total of all expenses with your monthly income, and adjust the expenses as necessary until your monthly budget equals your monthly income. Be sure you allocate as much as possible to the category “savings and investments”; 10-15 percent of your gross income is ideal. Getting the inflow and outgo to agree may take some doing, but persevere until your budget balances.
4. At the end of each month, see how close you came to your budgeted amounts.
   Use the Budget Worksheet below. Once you figure out whether your spending was over or under your budget, jot an explanation into the column next to major variances. If you consistently exceed your budget, you will have to adjust your spending habits or find a way to increase your income so you can accommodate your extra spending.

Use a computerized program to help set up your budget, such as Quicken. This will make tracking your expenses much easier, because it does the math for you as you go along.

Budget Worksheet
Paying yourself first	Budget	Actual	+ or –	Explanation
Cash savings
Debt repayment
Life insurance
Disability insurance
Retirement savings
Education savings
Auto payment or lease
Residence	Budget	Actual	+ or –	Explanation
Mortgage or rent
Property tax
Home insurance
Utilities
Repairs & cleaning
Gardening
Homeowner fees
Other
THE BASICS
Food and clothing	Budget	Actual	+ or –	Explanation
Groceries
Household supplies
Clothing
Dry cleaning and laundry
Health	Budget	Actual	+ or –	Explanation
Health insurance
Drugs & vitamins
Doctors, dentists, etc.
Other health costs
Personal care	Budget	Actual	+ or –	Explanation
Grooming
Other personal care
Transportation	Budget	Actual	+ or –	Explanation
Vehicle
Insurance & registration
Gasoline
Repairs / maintenance
Other transportation
Tuition & education
Legal and accounting
Family and Social Life	Budget	Actual	+ or –	Explanation
Child care
Entertainment
Meals out
Club memberships
Gifts
Pet expenses
Charity
Miscellaneous
The Extras	Budget	Actual	+ or –	Explanation
Hobbies
Vacations
Sports
Toys
Pocket money
	Budget	Actual	+ or –	Explanation
Totals