Manage Money

You have focused on the most important personal finance question of all. Its answer is the threshold determination for anyone trying to get a handle on his or her financial condition - "How much do I spend?" - which is sometimes stated with some frustration as, "...where does it all go?"

If you cannot figure out your spending patterns, making any other meaningful financial plans will be almost impossible. You might even do your situation some harm, thinking that you have money to spend on that long deferred "want" item when, in fact, you do not. Therefore, I think we should think about the whole expense side of your budgeting process because of its importance and because something as apparently simple as monthly expenditures can be so elusive.

If you want budgeting tips and a free guide, follow this link to Bills.com Free Budgeting Guide-Book:

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I will tell you, that you can rarely obtain a true picture of what your spending habits using a form, even if it looks very detailed. Most forms are based on a 30 day time period, but your life cannot be captured in neat thirty day segments no matter how hard you may try. Your life is fluid and in most periods, unpredictable. Just think of all the expenditures you make on an "as needed" basis or which are scheduled based on a period that has nothing to do with 30 days. For example, your insurance may be due quarterly, your property taxes annually, and the list goes on. There are also the incidentals, such as unexpected car repairs and medical bills, that defy pigeonholing in a thirty-day revolving schedule. Most counselors and other financial professionals adhere strictly to the thirty day schedule since they deal almost exclusively with your open-ended, unsecured commercial accounts which always use the monthly revolving schedule. Your real-world budget is something quite different.

The best way to get an accurate account of expenditures is to spend as normal (conservatively) but keep every receipt for every cent with which you part company. You will be shocked at how much of your spending has gone unaccounted in your previous budgets. When you have six months of receipts and cancelled checks, organize them by type of purchase, such as groceries, eating out, utilities, and so forth. Then move the receipts and checks into the month the payment was made or the proper period for which you received credit for the payment. Now that you have all of this information you can divide the receipts to help you see an average of what you spend each month, and how much money you need for non-recurring expenses. After thorough organizing you will also be able to see clearly where an economy might be possible. I use six months because the period is long enough to cover most special expenditures that seem always to somehow come up, such as anything from the driving ticket to the vet bill to the auto repairs that you paid - those things that are the foundation for the lament, "it's always something." However, if you feel that you cannot commit six months to analyzing your budget, try doing it for three month, or some other period of time. But keep in mind that the longer you keep track of your expenses, the more accurate your analysis is likely to be.

For your groceries and food include in that section all items that you buy at a given location or type of location such as a supermarket. That way you will account not only for groceries, but cleaning supplies, wine & beer, and the odd sundries and hardware. Keep your restaurant bills and other eating expenditures separate. I believe that categorizing expenditures by where you actually make purchases reflects how you actually run your life, and will not yield an artificial list of goods and figures that will make you wonder who that person is who bought all that stuff.

As for the amount of money you should spend on items such as food, housing, etc, there are as many answers out there as there are people whom you ask. The IRS thinks you should spend $150.00 per month for each member of your family, while the Department of Agriculture says $400. Only you can determine what your reasonable expenses should be. After you have gathered the accurate data as recommended, you should be able see in which area spending cuts are possible.

A possible resource you should consider for help with budgeting is Personal Mvelopes (http://www.mvelopes.com ) an online service which helps you track your spending habits by allowing you to allocate money to each area of spending (food, dining, entertainment, etc.), then the system tracks your ability to stay within your allocated budget. This system is basically a technological improvement on the "envelopes" budget management system that many consumers have used for decades.

Good luck in planning a budget that helps improve your financial situation. I hope the information I have provided helps you Find. Learn. Save.

Thanks,

Bill

www.bills.com