Budget Finances

Keeping track of where your money comes from and where it goes is important. Budgeting your money will tell you if you are meeting your financial goals or not and why. It can also help you stay out of debt. A budget is a great tool for those who want to manage their money, become financial responsible, and obtain specific goals.. as long as the goals are realistic and you are responsible/ diligent on how you handle and manage your spending.

Three (3) Terms of a budget are:

Net Income

  • this is the value that is deposited in your bank account after taxes are deducted
  • this is the income that you can spend, save, invest
  • also known as disposable income

Fixed Expenses

  • regular expenses such as rent/ mortgage payment, car payment, etc
  • normally the same amount that is withdrawn at the same time each week / month

Variable Expenses

  • these expenses are continually happening but vary in amount each day/ week/ month, like groceries, automotive gas, electricity, etc.
  • incidental expenses
  • periodic expenses that don’t occur often, such as medical expenses, gifts, travel, etc.

Here is an example of a basic budget:

Income $100.00 Expenses $(60.00) Savings $40.00

The first step in creating a budget is to make list of all your expected income and expenses for an entire month, such as:

– Weekly/ Biweekly/ Monthly Income
 — Daily/ Weekly/ Monthly Food Expenses (groceries and take-out)
 — Rent/ Mortgage
 — Electricity, Gas, Cable, Water Bills…
 — Transportation Expenses (bus, subway, train, automotive & gas)…
 — Entertainment- Movies, concert tickets, sporting event, camping, skiing…
 — Phone / Internet Expenses
 — Credit Card Expenses
 — Gifts
 — RRSP
 — Clothing Expenses
 — Parking
 — Home Furnishing (furniture, air conditioner, washing machine….)
 — Insurance (house, car…)

$ Then put a dollar value against each item $

Be realistic when planning a budget so you don’t go into debt.

The point of making a budget is to spend within your means, save & invest some of your money, and to stay out of debt.

You can create a spreadsheet in your computer with excel (for example) or on paper.

Recording your budgeted list items with a spreadsheet would look like this:

Timing & Transaction Item Amount

Every Friday Pay Day $300.00

On the 15th of every month Car Loan $250.00

Weekly Groceries $400.00

On the 20th of every month Phone Bill $40.00

1st of every month Rent $500.00

Next you would want to expand your list to see the MONTHLY Impact on you bottom line. If you go in the negative, then you need to cut your expenses back or find a way to increase your income.

Transaction example

Every Friday Pay Day $300.00/ week ….. $1,200.00/ month

On the 15th of every month Car Loan $250.00/ month

Weekly Groceries $100.00…. $ 400.00/ month

On the 20th of every month Phone Bill $ 40.00/ month

1st of every month Rent $500.00 / month

Calendar

Plotting your budget list on a Calendar is handy too. Write down the budget items on the dates they should impact your account and include the dollar amount anticipated. Estimate those expenses that are variable or incidental… and be realistic with your estimates.
 Seeing your budget on a Calendar will show you the daily and weekly activities. It will highlight those days that you may be running shy with your chequing /savings account, which may cause you to bounce an expense. If you see a problem then you can either move the item (if allowed), lower the value of the amount (if allowed), or cut back on some prior expenses which will give you more money to work with… or find a means to gain more income.

Database

A more elaborate and very effective option is recording your budget in an MS Access Database. Designed properly, it takes the list and calendar options a step further. It shows you various results in a variety of formats with the help of sorting and filtering options to give you a different angle of looking at your income and expenses. It provides an overall review of where your money is going and can make you think of ideas on where to cut down expenses so you can reach your financial goals. You simply enter your information and let the database work for you by showing you the results, fast. It is an eye opener when you finally step back and see that every little dollar does add up. You can be very surprized at the amount of money you are actually spending on certain items that you may have believed was a trivial amount turned out to be quite extensive.

The great part of a database is that anybody (newbies/beginners) can use the database at home by simply entering their information in and produce informative results with just a lick of a button.

After a Budget is Prepare

So what do you do now after recording your budget?

You have a goal (a trip, investing, a new wardrobe, gym membership, new home, …) and you now have a budget to get you there. You know how much money you make and you know all the expenses you have.

BUT, there could be a wrinkle in everything you have done up to this point. There is your Budget, essentially a wish-list / roadmap. Then there is REALITY.

Budget and Reality can be very different. Reality is how you live every day and how you spend your money. How you spend your money may be very different from the budget wish-list you have. Having a Budget is one thing, sticking to it to make sure you don’t deviate from it is another thing all by itself.

If you don’t have the discipline and are not accountable to yourself with your budget then you might as well throw it out the window. It will be a waste of time and effort if you cannot manage your money, if you can’t stay out of debt and you can’t seem to reach your financial goals.

If you want to stick to a Budget and reach your financial goals and stay out of debt then you need to be disciplined.

You need to record your transactions whenever they occur. You need to know you have a certain amount of money for the items on your list and to re-think a purchase if it is going to throw your plans out the window. Sure there will be surprizes along the way and you will need to accommodate them as best as possible. But the surprises should be infrequent and they should be dealt with on an individual bases that may cause a Budget overhaul, like to accommodate a new expense (Auto repairs) or new income (Bonus, Pay Increase), etc.

Starting at your Budget, log it on your Calendar which will help you plan for it and it gives a nice visual for you. Then start recording ACTUAL costs as they occur. You may want to take a Spreadsheet and expand rows and columns so you can add both budget and actuals.

Spreadsheet in Calendar

So, let’s say Friday comes along and it is pay-day. You know you make $300 a week but maybe more tax came off this time. Right beside the budget of $300 put the actual amount of $295, difference is $5.00 …not in your favor.

You know you have a car payment due that day and your budget is a set amount of $250, you check your account and see the payment was automatically made. So, on your calendar you put actual $250.

Friday is also your grocery day. Your budget allotted $100/wk for groceries. To help you stay focussed on your grocery shopping, make a list before you go out. Put estimates down (or actuals if you have food flyers at your disposal) and tally-up your items to ensure you have enough for shopping. Some weeks you may spend more than others, that is OK. As long as your overall monthly expenses don’t exceed your budget.

After grocery shopping, record the Actual amount you spent… $85.00.

Overall so far, the bank balance is $10.00 less than what was planned! Not bad!

Know where your money goes

It is always a good idea to know where your money has gone. Do you know how much you spent in groceries, entertainment, gas, credit cards… this past month or year? How can you compare your expenses to one another? What do you mostly spend your money on and can you somehow reduce it. Would you be shocked if you found out? Probably. Where there is a problem there is a solution. Read your financials and understand where your hard earnings are going. You don’t have to be a miser to improve your situation and everyone can improve their financial situation someway somehow. You just need the tools to help you, your thinking-cap on, a set goal, and discipline.

Budget your money, compare it to actuals, put a portion aside for savings, improve your financial status, and meet your goals.

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photo credit: Piggies! via photopin (license)


Originally published at www.databasecreationsite.com on January 30, 2016.

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