How To Budget Your Money

Ann House, MS, CFCS

Why should I budget my money?

• Make your money go where you want it to go

• Pay off debt• Resist the urge to overspend• Make your money work for

you

Budgeting your money will help you make smart money choices:

Budget Wisely

Being smart about money can help you:

• Start saving• Finance a higher education• Buy a house• Build a retirement fund• Improve the quality of your life

Steps for Making a Budget

• Total monthly income• Track expenses• Compare income to

expenses• Evaluate and adjust

Total Your Monthly Earnings

• Bonus pay• Dividends and interest• Commissions• Alimony and/or child support• Public assistance• Pension or retirement income

List your salary or self-employment wages as well as any other income you receive, such as:

Fixed Expenses

A fixed expense is a cost or obligation that occurs regularly and

doesn’t vary in amount.

List Fixed Expenses

• Rent/mortgage• Car payment• Insurance• Groceries• Utilities

It’s important to know where your money is going. Make a list of all your fixed expenses:

Variable Expenses

A variable expense is a cost or obligation

that occurs regularly, but may vary in

amount.

Examples of Variable Expenses

• Car repair• Dentist• Lawn care• Holidays• Lessons• Magazines• Recreation• Travel

• Travel• Sports• Vacation• Pets• Insurance• Hobbies• Birthdays• Contributions

List Variable Expenses

Write down all variable expenses for one month, even small ones.

• This is important – it will help you understand your spending habits

• Write down every purchase, even cash purchases

• You may be surprised at how much you spend in each category

Discretionary Expenses

Discretionary expenses are your indulgences – things you splurge on but that you can live

without.

List Discretionary Expenses

• Restaurants• Massage• Manicure• Concert tickets

Look at bank/credit card statements and estimate expenses for cash purchases or keep a daily log to track these expenses. Examples:

Compare Expenses to Income

Which is higher, your income or expenses?

• If you’re spending more than you’re bringing home each month, you have a deficit.

• If you’re spending less than you’re bringing home each month, you have a surplus.

If You Have a Deficit

If your income is less than your outgo, begin cutting back on nonessentials:

• Spend less on variable expenses.

• Use cash instead of credit cards.• Be realistic—take control of your

spending now.

Use the Step-Down Method

Instead of drastically cutting things out of your lifestyle, try the Step-Down method.

• If your family has a tradition of going to a movie and dinner every week, try renting a movie and eating popcorn.

The Step-Down Method

• If a haircut at a salon normally costs $15, get a $5 haircut at a beauty college instead.

• If you enjoy winter sports, try snowshoeing instead of skiing.

• Offer your services in place of a gift, like babysitting for your sister for a night out.

Tips for Saving $$$ from America Saves

• Save $.50 a day in loose change $15• Bring lunch to work ($5/day) $100• Cut soda pop consumption (60¢ day)

$18• Eat out 4 fewer times a month

$60• Eliminate premium cable channels $20• Buy grocery store brands

$10• Avoid credit card late fee

$25

If You Have a Surplus

Saving is the key to a successful financial future. Direct your savings toward your primary objectives:

• Emergency funds• Child’s education• Home ownership• Retirement

Additional Sponsors:

• Trish Cutler• F. Dean Miner, Jr.

Credits: