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12/22/10 14:37, by auntiedoris, Categories: Household Tips, Seasonal Tips, Lifestyle Tips, News, Inspirational , Tags: clearpoint, direct, financial, money, tip
At this time of year you cannot turn on a TV, radio or pick up a newspaper without some report on how to manage your money while shopping for the holidays. This topic is done to death and to be honest, I start my holiday shopping with the best intentions, but it does not always end happily.
I map out a plan, I try to carry cash and I allot funds throughout the year - but something always happens and I end up spending more than planned. After all I am only human and I want to make the holidays special.
So lets skip the lecture on how to avoid the post holiday blues and just accept the fact that we spent too much. Now we need a plan to get out of the mess we are in, today I will lay down some frame works that can help you get back on track.
It is frightening how many people do not have a budget written down (in your head does not count) and even more frightening are people that have written it down but do not follow it. Budgets sound scary but they are not, it is simply a snapshot of all your earnings and all your costs.
To start this process simply take a piece of paper and in the top left corner write down the total income you receive per month. I choose month because that is when most bills arrive; by the month. You can also do this in an excel spreadsheet if you want, it does help with the calculations but lets keep it simple to start.
Most people are paid either weekly or bi-weekly, it is very important to note, there are not really 4 weeks in a month, there is actually 4.35. So if you are paid weekly multiply it by 4.35. If you are paid bi-weekly, divide it by 2 and then multiply it out. This is very important as this will give you a more accurate indication of what you earn. Don’t forget to do this with your expenses too.
Now you need to list all of your expenses, at this point it is very important to include the following:
Personal Fun Money: This covers things like going to the cinema or buying shoes – mmmm shoes (but I digress).
Savings: This will help cover any unforeseen expense on the horizon. For instance if your car breaks down or you want to take a holiday.
Credit Payback: This is the amount of money you will pay back to your credit cards (the whole reason we are in this mess now).
The types of expenses you can list are unlimited and I could list all of them, but they are personalized to each individual and would take a long time and I may loose you before I am finished, so I will list some to help start you off:
It is very important to list all expenses no matter how trivial, it is better to know about them than to get a surprise when the bill arrives and all your money has been allotted elsewhere. Don’t worry if you do forget something because we have that savings allotment.
Most of these expenses are fixed so there is no room for interpretation, however the three I mentioned earlier- Personal Fun Money, Savings, and Credit Payback are not. This is where it gets interesting.
You need to be honest about the numbers you put here and not ones that just look right and make your budget work. For example if you allow $50 for Personal Fun Money but you really spend $75 you will find yourself in a hole each paycheck. So just put $75.
Savings and Credit Payback are also vital to your financial survival. If you pay too much into these you will be leaving yourself short each paycheck and you will end up spending more on your credit card and dipping into your savings and your budget won’t work.
You must put enough back on your credit card to be more than the minimum payment but not too much that you do not leave any for yourself. This is the key right here, this is what makes this work. If you ignore everything else I have told you remember this:
Do not pay back on your credit card more than you can afford.
You will just continue to spiral if you do. You need to put enough to reduce the amount owing on the card but not too much so you are stretched each month. The same goes for your savings, put some away for a rainy day but not too much, be realistic.
At the end of this exercise you will hopefully have a budget that has a surplus (some left over at the end) or is balanced (when you take away all your expenses from your income you have a $0). If not – you can play with the variables, spend less on yourself, or adjust the amount you are leaving for a rainy day.
Do not be upset that you have $0 at the end of this exercise, this does not mean you have no money spend on yourself, remember you have already put some aside just for you.
I hope this helps see that budgets are not that scary, they just have scary names.
Till Next time keep safe and have a happy holiday. This is the last update until after the new year, I need a holiday too!