The Budget

The value of planning has been seen as an elusive truth over time:

• "By failing to prepare, you are preparing to fail." - Benjamin Franklin
• "People often complain about lack of time when the lack of direction is the real problem." - Zig Ziglar

Taking the time to budget is a necessary step in assuring our financial health. But what do we really mean when we say "budget"? There are several steps involved. First we need to understand how we are spending our money currently. Secondly, we need to lay out a list of our monies coming in and monies going out. This is not complicated stuff, but it is very difficult for most of us.

If you are not already doing so, it's time to figure out how we are currently spending our money. Programs like Quicken can help - Intuit even has a free online version of its Quicken software: http://quicken.intuit.com/. Some people find a spreadsheet like Excel can be useful, with free online expense and budget templates available. There are those who are comfortable with a pad and pencil. The method is not important.

Take your checkbook and other available records or receipts and list what is being spent. Have columns that show who the payments are made to, the amount and the categories of expenses, such as "Food", "Gas", "Clothing", "Rent", etc. Some of our expenses will be very routine, occurring every month for the same amount, like "Rent". Others will be more sporadic, like "Medical Expenses". We should look at a couple of months at least. The longer the time frame that we look at, the more we recall those expenses that happen infrequently.

At this point we have an idea as to where our money is currently going. Time to begin laying out a plan. You can plan the whole year, but for those who are totally new to this, let's just start with planning out the next month.

List and total the income you expect to receive in the next month. Now, using the expense categories we discussed earlier, make a list of the types of expenses that you expect to have to pay in the next month and the amount you would guess you will need. This does not have to be exact. Getting started is the key here. A good plan today beats a perfect plan tomorrow.

• "Plans are worthless. Planning is essential." - Dwight D. Eisenhower

Include in this list of expenses money for savings. By paying yourself first, you are developing a pool of money to fall back on in the event of some unforeseen hardship, like a lay-off, medical surprises, or unexpected home or car repairs. 10% of your gross pay (before taxes) is usually a good start.

Total your expenses. Do you have enough to cover all of your expenses and some savings? Wonderful news! Any excess can be used to cover additional savings for that vacation you wanted or to develop your nest egg more quickly. I can see that more than a few of you are scratching your head because it seams that your money didn't last as long as your month.

This too is actually a good thing in that we are discovering, in advance, what many people don't discover until their debt cup runneth over. Time to sharpen the pencil!

Working with your family, go through your expense categories and ask yourselves:

• Do I need the half-caff soy double latte each day at $3 a cup or can a $.50 a pot cup of coffee at home do the trick? You'll live?? Good News - you just saved close to $1,000 a year
• Instead of eating out twice a week, maybe cutting back to once a week or twice a month can be sufficient. This move alone could save thousands each year.

"Got it Chris - but we've already cut out that kind of fat from our expenses!" OK! Let's dig a little deeper! Here are some of the areas that I find can be deceptively harmful:

• Fast food: Picking up McDonald's for a family of four once a week because we are too busy/tired to cook: This could easily cost close to $25. For that kind of money you could easily prepare a healthier, more nutritious meal at home and still bank an extra $500 a year. This doesn't include the reduction of future medical costs. If this doesn't convince you rent the DVD "Supersize Me".
• Rent? I mean go to your library and borrow the DVD. Many public libraries today have great, current DVD collections. Two movies a week from "Blockbuster" or "On-Demand" will run close to $500.

These are just some simple, easy targets. Many more lie within the details of your budget.

How hungry for change are you? In the words of Dave Ramsey, author of The Total Money Makeover, we should be telling our money where to go, instead of asking where it went. Taking control of our money is not rocket science, but it is work.

As with the most difficult tasks in life, it starts with one foot forward. Start now! You have it within you to take control of your life. No one can do it for you. It's up to you!

It's a great day!!

"Beware of little expenses; a small leak will sink a great ship" Benjamin Franklin