Where Does Your Money Go?

Your income is not increasing at the same speed as the cost of living, your grocery cart costs you more and more each week, as are taxes, back to school expenses (books, school supplies and clothing), registration for your car or your motorcycle, insurances, etc..

The list is long and the money flows away from you. If you're not in control of your finances, your debt will rapidly increase and you are likely to find yourself in an uncomfortable situation.

So, what to do, what are the necessary steps to gain control? You've tried to keep a budget, but you find it arduous and complicated. Nevertheless, it is necessary so, to help you, we offer a fairly simple and effective method to record your income and expenses.

To establish a budget, a first decision is required. You must choose the period covered by your budget. It may be a week, a month, a year or another period suitable to your situation.

A classic is to make a monthly budget. Indeed, revenues are easy to calculate for a month, as is spending. The rent or mortgage payment and utility bills, telephone, cable television - among others - are often monthly. For these reasons, we will set a monthly budget you can adapt to suit your needs (see Appendix at the end of this document).

Step 1: Income

Do not make the mistake of inflating your income; you will gain nothing counting an illusory or uncertain income. You must live with reality.
Be honest. Remember that the purpose of a budget is to grasp, at a glance, your financial situation. If you inflate your income and minimize your expenses, your budget will be useless.

Revenues are recorded. The time has now come to calculate your monthly expenses (spending).

Step 2: Fixed expenses

Fixed expenses are recurring expenses. You must pay these amounts each month, no matter your income level or your mood.

Step 3: Variable costs

Variables expenses can vary from month to month as they are not necessarily recurrent. When due, you mustpay these amounts, whether you expect to or not.

Estimate the costs as fairly as possible and try not to forget any. Some of these
expenses are not payable on a monthly basis (taxes, registration, driver's license, etc...)
while others are unpredictable (car repairs, illness, etc...). Be as accurate as possible,
based on your past years’ experience. Also, as it is better to save more than not
enough, you'll appreciate having a cash surplus.

For those who really want the best way to assess monthly expenses, keep a financial journal for a few weeks. By registering everyday expenses, you might be surprised!
These lattes purchased every morning at $3.45 costs $900 at the end of the year!

These small purchases add up! In addition, you will realize quickly that there are many expenses that you failed to include simply because you did not think of them when making a budget.

You'll be surprised to see how fast these small amounts can accumulate, forming large amounts that can affect the balance of your budget.

You’ll have to decide what matters most in your life: a trip or a coffee every morning?

By: alvi

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