If You’d Rather Have A Root Canal Than Create A Budget …

By Marsha Brooks, CPA

If you’d rather have a root canal than create a budget, you’re not alone.  There are many factors that make budgeting difficult.  It can be “I don’t know how to start”, fear of the unknown, or possibly denial.  Let’s take a look at a couple things to bring fresh light to the process.

The best place to start a budget is to look at how you are spending money now.  You can list the main categories: Housing, Food, Transportation, Utilities.   Write down what you already know. Other categories may include, Clothing, Hair Care, Children’s expenses, Education, Gifts, Health Care, Loan payments, Entertainment.  Every household is different, but you will probably have 10 – 15 categories.

The next step is to track where your money goes.  There are a few ways to approach this.  One would be to look at your bank and credit card statements, and add up the amounts associated with your statements.  We are all ‘wired’ differently, so some will have fun digging into the detail and for others, the numbers will be swirling and mixing together. The great thing is technology has given us other resources. My favorite is www.mint.com. This is a very secure site where you link your bank and credit card information, and they take care of the categorizing mechanics for you. Alternatively you can search for apps for your phone or tablet. Read the reviews and see what makes sense for you.

Tracking daily and weekly expenses is where we start, but also make allowances for those things that come up once or twice a year. Insurance, holidays, vacations, property taxes, and vehicle registrations may fall into this group. Estimate what you think these amounts are and divide by 12. This is the amount that needs to be saved monthly for the annual costs.

Once you have your expenses listed, you’ll need to compare to your total income. If you have more income than expenses, go back and look to make sure you have listed everything accurately. If you have, the surplus can be used to pay off debts or for savings and investment. If you have more expenses than income, be sure you have listed everything accurately, and then go back and review where you can whittle down. There are no “right” answers with this step, but it may mean some hard choices. But they are your choices, and you get to decide what works best for your family.

Working with people who have walked through these steps, most feel empowered by the process. They have insight and information as to their financial health that they didn’t have before. Someone once said, “What you can measure, you can manage.”  May this be the first step in creating your new management plan.

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