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Where does all my money go?
We have all asked this question at one time or another. It seems like the more
money we make the more it just seems to disappear. There never seems to be enough
to pay all the bills and to be able to do the things we want to do. So what happened?
Budget helps this process by keeping all the records of what you do with your money
in one place. However, if you are just starting to come up with a budget all that
information doesn't yet exist in one place. So before we say how Budget keeps track
of your money, let's see if we can figure out what information you have now.
Income
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Most of us have a job and get paid. Thats the first piece of information we need.
As much as we might like our pay to keep increasing, it probably is a fairly constant number.
Something like we get a pay check for $450.00 every Friday or we get a deposit to our
bank account every month for $3000.00. From this we can start to figure out what our
monthly income is. In the latter case its real easy, we get $3000.00 per month. In the
first case we get $1950.00. Surprised that it's not $1800.00? There are 4 weeks in a
month and $450 X 4 is $1800 so where did the other $150 come from? Turns out when you are
paid weekly, since there are 52 weeks in a year, that there are an additional 4 pay checks you
receive. That amount should be distributed over each of the twelve months in the year to
determine your true monthly income. Why is monthly income so important? Mainly because
most bills are due monthly.
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What other income is to be received? Interest on your savings? Refunds from
insurance payments? Hit the lottery? Most likely these are one time things and don't
really contribute much to sticking to a budget.
Expenses
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The most common expenses are all those monthly bills. Mortgage, utilities, groceries, gas for the car, etc.
etc. etc. Some are real easy to figure your monthly expense. The mortgage or rent payment doesn't change
and comes each month. Some are a bit harder. The phone bill comes each month but it's never
the same amount. Here is where you need to do a bit of work. Do you have your old phone bills?
If so, try to average them out to determine about how much you spend each month. Don't have the
old bills? Did you mark them in your check register when you paid them? If so, use that information
to determine how much you spend monthly. This process must be done for all of your monthly bills.
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Other expenses. These are the ones that you need to be most concerned about. The normal
monthly bills are accounted for above. If you're spending money on that credit card, what are you
spending it for? Got cash in your pocket, what are you spending it on? Make a list of all the
items you can think of and try to organize it into categories. Then try to figure out (the same as
above) how much you spend for each category each month.
Once you have this information you are ready to start setting up your budget. Using Budget you can define your pay sources. You can set up an envelope for each bill or category by creating envelopes. Once you have accomplished this you are well on your way to keeping to a budget. As you use Budget to pay each bill, get paid, or receive a refund, Budget keeps a record of what you have done. With this information you can begin to track where your money is going.
Remember to enter EVERY expense in Budget. If you don't have an envelope that captures that type of an expense, create one and allocate money to cover it. This is refining your budget plan. In order to be effective you MUST capture every expense and allocate funds. One very important area to be aware of is "Cash". In this world of credit cards everyone still spends some form of cash. Track it with a "Cash" account or envelope, or see handling cash. And don't forget those credit cards, see handling credit cards.
Now the hard part. What do you do if there are no additional funds to allocate to this new expense?
- How important is the expense? Not very important? Don't spend it.
- Is this more important than some of your other expenses? Reduce the allocation to that envelope and increase it to this envelope.
- Can't reduce anything? You may need professional help which is beyond the scope of this program. Once you have started back on the path to financial stability use Budget to ensure you don't go off it again.
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