Learn how to budget your expenses and saving strategy for your financial well being and live within your means.

Money management skills and daily budgeting your expenses.

An Online Free Christian Magzine on money issues

Money Management Part 9

Budgeting and Expenses

Your Expenses

Expenses are of course the items you spend your money on, sometimes whether you like it or not. There are several ways of classifying the expenses: fixed or variable/ discretionary, necessity or luxury; arbitrary amount or fixed percentage, and all shades of gray between them. But there are inescapable reductions from your paycheck that are musts, which you should resign yourself to live without.

First to be deducted from your paycheck is tax, mainly federal, state and city taxes on gross income. These deductions are legislated and you cannot object to the amounts, which are based on the information you give in the W-4 form. The size of the taxes are sometimes surprising, especially to the newly-hired employee receiving his first salary.

The second deductible from your income is social security payments. These are the amounts used to provide for the unemployment checks, retirement pensions, and others as mandated under the Federal Insurance Contributions Act (FICA). Your employer is here mandated to match your contributions to social security, so the government receives twice the amount deducted from your paycheck.

Third as deductible is your company pension plan contribution, or whatever participation dues required of you by your company, association, or group insurance plans. These, however, are of your own making since you probably have the option to participate or not. An example is the company 401(k) program.

The above-mentioned deductions are examples of what are called fixed expenses; they hardly vary and must be paid. Outside of your employment, some more payables are house rent, club membership dues, insurance, even regular grooming costs for your pets.

On the other hand, variable or discretionary expenses cover your food, clothing, transportation, recreation, and other items. The variable expenses are directly controllable by yourself –at your own discretion--- so you can decide whether to spend on it or not, and if yes how much? To have an idea of what are your expenses, try to fill up the table below. Feel free to add any expense you might have not listed there:

* Write N if Need, W if Want

A word of advice. In filling in the amounts for the table of expenses, please be brutally honest; otherwise, the exercise will be futile as you will just be deceiving yourself. Write down the average where the figures vary, or use the highest amount that occurred within a year. In this latter method, you can realize a little savings should the actual cost falls below the projected amount.

PLANNING YOUR BUDGET

After you have listed your income and expenses, compare the totals of the two, deducting the total expenses from the total actual income. If something is left, let me congratulate you: you are living within your means. You have a disposable income that you can invest or save for something you want to buy.

But if your total expenses exceed your total income, well, think hard and deep about what you can do. Following are some tips:

1. Prioritize your expenses. In the right-most column of the Expenses Table, indicate whether the expense item is a want or a need. A want is something you can do without, and a need is one which is necessary. Eliminate the wants one by one, starting from the most dispensable, until you reach your desired expense ceiling.

2. Reduce the expenses. After eliminating the more frivolous expenses, try to reduce the amounts intended for the remaining items. For example, you can lessen your entertainment expenditures by going out more rarely. Or changing your venue from the cinema to your own home. You can save on actual entertainment costs as well as on transportation costs. Do the same for some other items you may identify.

3. Expand the amounts for your savings and/or allowances. By doing so, you will be forced to reduce further expenses on some items to attain your expense ceiling.

4. Eliminate redundant expense items. You may have strong emotional attachment to your first car, but if it is proving to be more of a liability than an asset, perhaps it is better to sell it. You get some money for it and at the same time eliminate a major expense item. You can plan your trips in your second car, or join a car pool to compensate for the loss of a car. It can work for small items, too, such as magazine or newspaper subscriptions.

5. Plan your purchases. Tell yourself no more impulse buying. Make a list of your necessary grocery items and stick to it at the supermarket. Fight your impulse to get items not on your list, no matter how attractive they may be. When something strongly attracts you and you are reaching for it, ask yourself if it is really important to have that item. And when in doubt, don’t get it. you can always come back to it later if you have adequate reasons to really have it.

6. Set savings or expense goals. Plan to save a certain amount by a certain time, and map out how to attain it. Sometimes, by merely having an objective for saving money can steel your determination to save. If you want to purchase a nice dress by June, for example, you can rationalize your scrimping on chocolate ice cream every week, or cutting down on your smoking. You can even plan long term, such as a nest egg for your retirement.

7. Keep track of your daily expenses. Some friends I know listed their expenses, no matter how small, such as the purchase of some candy. After a while they discovered they were spending small amounts on really unnecessary items, and were able to save significant amounts. Often we overlook small expenses, until they accumulate, then we wonder where our money has gone.

8. Keep track of your monthly expenses. Copy the income and expense tables while blank, and over several months input the amounts for each item. Note your progress on reducing expenses, and determine where you can still cut down. One can always live on a little less.

9. Last, reward yourself.  There is nothing wrong in splurging on your favorite vice – sumptuous chocolate cake, really good movie, a bottle of expensive vintage wine--- when you have reached your goal. Just don’t do it too often, or you’ll be back where you started from.

Some Last Words

In the end, budgeting is simply gaining control of your expenses, and therefore your financial well being. But in doing so, you also gained control of your buying impulses and prioritized your wants and needs. Thus it made you a better manager of your finances and your future, while benefiting from the present. If only for that, you can be proud of yourself.

Now, don’t you think you should budget your finances?

Money Management Part 10

Debt Assessment Chart Download, Right Click "save as"

<Back to Budgeting your income table contents ||||||||||||||||||||||||||||||||||||| How to use your credit card wisely >

Website for Christian man on christian riches and christian wealth building, free debt reduction, christian money management and various issues. Free debt consolidation and management helps individuals get out of debt fast. Money issues providing self help articles on investments and getting rich. Absoluteguys covers USA, UK, Australia and Singapore.

Home / Christian Money / Personal Finance/ Community / Sitemap / Absolutedirectory / Sitelist / Debt Free Search Results / Money Blog

ALL COPYRIGHT OF WWW.ABSOLUTEGUYS.COM 2006 an online Debt Reduction Planner and Christian Money magazine