Creating and Maintaining a Budget Consumer Ed

 You'd never set out on a cross-country road trip without consulting a map.  Likewise, you can't expect to reach your financial goals without developing a plan for spending and saving.  What is a budget?  A monthly plan of how you will spend your money.  A budget helps you:  Understand where your money goes  Evaluate your wants and needs  Pay off debt/ stay out of debt  Plan/ save for the future Overview

 Most budgets follow a similar process.  1. In the month prior to starting your budget, keep track of your expenses  2. Determine your monthly income  3. Set spending amounts for each category  4. Track your spending  5. Compare budgeted to actual spending  6. Adjust your budget for the next month, if necessary. The Budgeting Process

Determine Your Income  Each month’s budget is based on the # of paychecks you get that month.  Ex. If you get a $1,000 paycheck every 2 weeks, your monthly budget would be based on $2,000.

Set Spending Amounts for Each Category (% of total income, recommended)  Savings (10-15%)  Rent (25-35%)  Transportation (10-15%)  Utilities (5-10%)  Food (5-15%)  Entertainment/ Recreation (5- 10%)  Medical (5-10%)  Clothing/Personal (10-15%)  Charity (10-15%)  Debts (ideally 0%!)

Fixed vs. Flexible Expenses Fixed Expenses  Need to pay every month, no matter what.  Price is usually the same each month.  Examples  Mortgage/ Rent  Car note  Utilities  Insurance Flexible Expenses  Price can fluctuate from month to month.  Examples  Groceries/ food  Gas  Entertainment  Medical bills  Personal Items

Track Your Spending  As you spend, keep track of your spending using your preferred method.  Mint.com offers free budget software  Gazelle Budget online  You can also use a budget worksheet

 As you move throughout the month, you may end up spending more in some categories than you had budgeted for.  At this point, you’ll need to adjust your budget, moving money from one category to cover another.  If not, you’ll have to dip into your savings (not a good idea) or use a credit card and go into debt (not a good idea either). What if I go over budget?