Taking Control of Your Finances – Part II: Planning

Welcome back to another fantastic discussion about everyone’s favorite topic: personal finances! Last month we asked everyone to write down all their income and expenses and track it. If you didn’t, no worries, this article may still prove relevant to you. To those of you that did, thanks for tagging along and taking a step towards being more responsible with your finances. Pat yourself on the back. Just probably not in public, no one likes a show-off.
So what do you do with the information you gathered over the last month? The first thing is to go through and tally everything up into either positive (money made) or negative (money spent) columns and see how you stand at the end. The single most important bit of information is making sure you are making more than you’re spending. If that’s not the case, it’s time to look at where you can make improvements, be it eating out less, cancelling some subscriptions, or maybe cutting back on entertainment some. Even if you did make more than you spent, there’s almost always room for improvement in the same areas.
Taking what we have here the next step is to build a budget for the future. Keep in mind, your budget will fluctuate. Bills change, gas prices adjust, etc. What we really are doing at this point is setting aside money for both the expected and the unexpected. Every dollar will have a job. We’ll make up a budget to play with over a given month:

• Income – $1,500
• Groceries – 400
• Rent – 500
• Utilities – 250
• Gasoline – 150
• Credit Card – 50
• Remainder – 150

Now, obviously most people’s full budgets look a bit more complicated than this but we’ll keep it simple. I personally like to allot a little more than I expect to spend in bill categories that might change from month-to-month so I can handle nasty surprises, like really hot or cold months, easier and build up padding for future months. If you’re spending less than you have put aside for a category, great! Keep it there and use it for next month! You might overspend sometime in the future and be glad you’d saved up some money.
You may have noticed that with this budget we have $150 left each month as a remainder. Now, we could blow this on video games, clothes, or movies, but that would be silly. Nice job not falling for that trap. Instead we’re going to be responsible and next month take a look at what to do with our remainder to ride through rough times and start saving for the future.