Budgeting - YUK!

Yesterday I told you we do our budgeting based on 80% of our earned income. Bob is on a pension and is working his consulting business almost as if it were a full time job. He's out on a day job right now. When he gets home later, we'll type of the report. That will take us about 2.5 hours. He wants his findings or recommendations to be published while they are fresh to him and to his client.

That's our picture. We know the amount of his monthly pension and we know what we need to earn to cover the short fall. But first we had to get our budgeting process done.

So do you if you want control over where your $ goes. Most of the people I have talked with are reactionary spenders. They simply respond to every bill that comes in the mail (or email these days). They simply respond to every ad or product placement that convinces them they need something.

The first constructive thing someone who wants control or who is in big trouble financially needs to do is create a budget. To record numbers for items like groceries, rent/mortgage, utility bills, dry cleaning, vehicle maintenance, insurance bills, magazine subscriptions, debt reduction, etc.

Budgeting can be a painful experience but it can be rewarding. Start with a draft of categories of disbursements out of your checking account like rent, cable bill, daycare, etc. You will need room to add categories.

Now, record everything you spend $ on over one month. Either a look back to a previous month (you'll need details off your Visa or MasterCard statement for groceries, fuel, clothing, entertainment, medical) or track a month going forward.

This will be an eye opener but the next step will too. You probably use cash for many things during the month. Carry a small notebook and list every payout. Cash for soda pop, tollway coins, bread on the way home, kid next door for walking the dog, etc. Consolidate items under larger headings like home maintenance for the lawn care, groceries for the out of pocket foot items, travel or commute for the tollway charges.

The biggest work of budgeting is getting a handle on where your $ goes/can go. Even look back to your auto insurance bill. If you pay twice a year, divide that by 6 to get a monthly cost. If you pay the real estate tax bill twice a year, again, divide by 6 to get the monthly number.

Take your time. I challenge you to be as thorough as possible. After a month of tracking categories and costs, recap everything. Don't forget debt reduction - payments toward the credit card balance. You will have charged things on the card and you'll need those numbers per category but one monthly payout now is also debt reduction so count it in a separate category.

I'll get back to budgeting with you in the future. You'll need to time accumulate things.

'til later