Smith Business and Finance

Expenses

Figuring out where your money goes each month is probably the hardest part of a money management plan.  The best way to know how much money you spend is to keep a record of every transaction.  You can easily do this by:

Using a small notebook to jot down any spending
Carrying an envelope to collect receipts
Reviewing your checkbook register
Saving any credit card receipts

Usually, tracking your spending for two-months is enough to give you an idea of your monthly expenses.  Once you know more about your spending, you probably won’t have to keep such detailed spending records.

The following are some examples of spending categories:

Housing
Insurance
Transportation
Clothing
Food
Entertainment
Savings and investments
Health care
Personal care
Family
Donations
Education
Professional expenses
Miscellaneous
Credit payments

Remember, not all of your expenses are monthly.  Property taxes, insurance, holiday and birthday gifts come quarterly or once or twice each year.  It is easy to forget about annual expenses and not have enough money to pay for them.  A Personal Money Management Plan will help you identify and anticipate these expenses.

Expenses come in two types:
fixed expenses and flexible expenses.
Fixed expenses are those expenses you must pay the exact amount each time you pay your bills.  Flexible expenses are those expenses that you can control, such as the amount of money you spend on eating out or how many movies you rent.

Sources of Income

Add your current total family income from all sources.  Include income from other family members if it is used for family expenses.  Remember to use the take-home amount, or what you actually have left to spend after deductions.

Some sources of income include:

Earnings from employment.
Interest from checking or savings accounts or a credit union.
Tips or commissions.
Interest or dividends.
Gifts from family or friends.
Child support or alimony.
Income from inheritances and trusts.
Unemployment compensation.
Educational scholarships.
Social Security, pensions, or annuities.
Supplemental Security Income (SSI).
Public Assistance.
Food Stamps.
Veterans’ benefits.

Comparing Income and Expenses

Add your expenses and compare the total to your current income.  Are your expenses more or less than your income?  If they are more, what can you do to bring your expenses in line with your income?  Consider adjusting your expenses by doing one or more of the following:

Cut spending.  What are the easiest flexible expenses that you can cut back?
Increase your income.  Is working a part-time job feasible for you?
Don’t buy on impulse.  Tell yourself, “It it’s not in the budget, I can’t have it.”  Then take your own advice.
Barter or trade for services.  Trade your skills or product with someone else without using money.  (Find Example)
Substitute a lower-priced item or similar item for something you must buy.
Borrow or rent things, rather than purchase them, if they won’t be used frequently.
Look at your other assets.  What savings or investments do you have that could be used, or converted to cash, to meet emergency expenses?  Remember that borrowing and using savings should only be a temporary, last-resort solution.
Reduce your fixed expenses.  If too much of your income is going to fixed expenses such as housing or debt payments, there may not be enough money left to cover your other living expenses.  As a last resort, you may need to refinance your loans or move to lower-cost housing.

Do you feel like you do not have enough money? Try as, do you have a difficult time paying your bills? Can you barely make a living out of your paycheck?

Many women expressed these same frustrations. Sometimes we splurge on a good pair of shoes or a nice dinner with friends. Or, we forget someone’s birthday and at the last minute and left without buying a gift. Or, simply can not seem to stretch our salary to pay all our bills.

That’s why it is important to begin to find out where our money goes – every year, month, week or even every day. The following information provides some basic guidelines to help you develop your own plan for managing money.

Personal Money Management is a plan for managing income and expenses. It tells how much money you have and how much you spent. It also tells you how much you can afford in the future. It tells you what you can and if you can afford.

With a personal money management:
- You can plan how to spend your money so that you do not get into financial trouble.
- You will be in full control of your money.
- You will be prepared for emergencies
- You can avoid getting into serious debt.

It also provides you with economic security and have the ability to plan long-term goals such as buying a car, buying a house, or going on nice vacations.

How do we start?

There are four steps in developing your Personal Money Management Plan:
1. Listing your expenses.
2. Listing of income sources.
3. The comparison of income and expenditure
4. Set priorities and make changes so that your income will exceed its costs.

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