money management

Personal Money Management Do you feel as if you never have enough money? Try as you might, do you have a tough time paying your bills? Can you barely make ends meet with your paycheck? Many women express these very same frustrations. Sometimes we splurge on a nice pair of shoes or a good dinner out with friends. Or, we forget someone’s birthday and at the last minute run out and buy a gift. Or, we just can’t seem to stretch our paycheck to pay all of our bills. That is why it is so important to begin to figure out where our money goes--each year, month, week, and even each day. The following information provides some basic guidelines to help you develop your own personal money management plan. With a personal money management plan: You can plan how to spend your money so that you don’t get into financial trouble.  You will be in complete control of your money.  You will be prepared for emergencies.  You can avoid going into serious debt. You will also be providing yourself with economic security and you will have the ability to plan for long-range goals such as buying a car, buying a house, or going on a nice vacation. How do I get started? There are four steps in developing your Personal Money Management Plan: 1. 2. 3. 4. Listing your expenses. Listing your sources of income. Comparing income and expenses Setting priorities and making changes so that your income will be greater than your expenses. Personal Money Management is a plan for managing and spending income. It tells you how much money you have and how much you’ve spent. It also tells you how much you can spend in the future. It tells you what you can afford and when you can afford it.  Expenses Figuring out where your money goes each month is probably the hardest part of a money management plan. The best way to know how much money you spend is to keep a record of every transaction. You can easily do this by:     Using a small notebook to jot down any spending Carrying an envelope to collect receipts Reviewing your checkbook register Saving any credit card receipts Usually, tracking your spending for two-months is enough to give you an idea of your monthly expenses. Once you know more about your spending, you probably won’t have to keep such detailed spending records. The following are some examples of spending categories:                Housing Insurance Transportation Clothing Food Entertainment Savings and investments Health care Personal care Family Donations Education Professional expenses Miscellaneous Credit payments Remember, not all of your expenses are monthly. Property taxes, insurance, holiday and birthday gifts come quarterly or once or twice each year. It is easy to forget about annual expenses and not have enough money to pay for them. A Personal Money Management Plan will help you identify and anticipate these expenses. Expenses come in two types: fixed expenses and flexible expenses. Fixed expenses are those expenses you must pay the exact amount each time you pay your bills. Flexible expenses are those expenses that you can control, such as the amount of money you spend on eating out or how many movies you rent. Sources of Income Add your current total family income from all sources. Include income from other family members if it is used for family expenses. Remember to use the take-home amount, or what you actually have left to spend after deductions. Some sources of income include:               Earnings from employment. Interest from checking or savings accounts or a credit union. Tips or commissions. Interest or dividends. Gifts from family or friends. Child support or alimony. Income from inheritances and trusts. Unemployment compensation. Educational scholarships. Social Security, pensions, or annuities. Supplemental Security Income (SSI). Public Assistance. Food Stamps. Veterans’ benefits. Comparing Income and Expenses Add your expenses and compare the total to your current income. Are your expenses more or less than your income? If they are more, what can you do to bring your expenses in line with your income? Consider adjusting your expenses by doing one or more of the following:         Cut spending. What are the easiest flexible expenses that you can cut back? Increase your income. Is working a part-time job feasible for you? Don’t buy on impulse. Tell yourself, “It it’s not in the budget, I can’t have it.” Then take your own advice. Barter or trade for services. Trade your skills or product with someone else without using money. (Find Example) Substitute a lower-priced item or similar item for something you must buy. Borrow or rent things, rather than purchase them, if they won’t be used frequently. Look at your other assets. What savings or investments do you have that could be used, or converted to cash, to meet emergency expenses? Remember that borrowing and using savings should only be a temporary, last-resort solution. Reduce your fixed expenses. If too much of your income is going to fixed expenses such as housing or debt payments, there may not be enough money left to cover your other living expenses. As a last resort, you may need to refinance your loans or move to lower-cost housing. Setting Priorities and Making Changes Setting priorities and making changes is a continuous process meaning that as your life circumstances change, so should your money management plan. But this is a good starting point to begin to think about your goals for the future, including your financial goals. Goals provide focus, purpose, vision, and direction for your life and your money management plan. Goals can be either short-term or long-term. Some examples of short-term goals are:   You want a new pair of shoes for work, your goal would be to save money to buy the shoes. You want to buy a microwave oven for your apartment, so your goal would be to save money to buy the microwave. Some examples of long-term goals in are:   Do you wish to buy your own house? Your goal is to save money for a down payment on a house. Do you want to go to college? Your goal is to save money for tuition. If you have children, think about involving them in the process of thinking about and deciding which goals are important for your family and the ways in which they can help the family achieve those goals. With the entire family supportive of both long- and short-term goals, it will be much easier to be successful in reaching your goals! Some final points to remember:        Everyone’s money management plan is different. Money management plans change as your life changes. Money management plans should be flexible! They should not rule your life, but they should help guide you. Your money management plan should help you meet your financial goals. Keep your money management plan simple! How much money you make is not as important as how you use what you have. A money management plan is for everyone. WORKSHEET 1: SPENDING PLAN Expenses Housing Rent or Mortgage Property Taxes Electricity Heat (gas or oil) Water/ Sewer/ Garbage Telephone Cell phone or pager Repair/ Cleaning supplies Furniture/ Appliances Floor/ Window coverings Fixed or Flexible Weekly Monthly Quarterly Yearly Goals Insurance Home or Renters Life Disability Health Auto Transportation Car payments Gasoline Maintenance/repairs License/registration Parking Taxi Tolls Bus/subway Expenses Clothing Clothing Laundry Dry Cleaning Fixed or Flexible Weekly Monthly Quarterly Yearly Goals Food Groceries Work Lunches Bought School Lunches Bought Entertainment Meals out Vacation/Trips Music/sports/movies Television/cable TV Membership dues Other Savings/Investments Credit Union/Bank Company Savings Plan IRA/Keogh/SEP Money Market Fund Emergency Fund Other Health Care Medications Doctor/dentist/oculist Insurance deductible/copayments Caregiver fees Personal Care Barber/beauty shop Cosmetics/toiletries Expenses Family Personal allowance Child care Allowance (children) Child support Fixed or Flexible Weekly Monthly Quarterly Yearly Goals Donations Religious Charitable Education Books/magazines/ newspapers Hobby expenses Children’s education Expenses Adult education expenses Professional Expenses Membership/dues Publications/books Travel Other Miscellaneous Taxes (Social Security) Taxes (income, federal) Taxes (income, state) Pets (care, food, license) Gifts/flowers (yearly) Gifts/flowers (holiday) Other Other Credit Payments Credit Unions/bank Expenses Credit Card Department store Student loan Other loan Other loan Other Fixed or Flexible Weekly Monthly Quarterly Yearly Goals Total Expenses WORKSHEET 2: INCOME Income Paycheck Paycheck Dividends Interest Social Security Pension Gifts Alimony Child Support Unemployment Educational Scholarships SSI Public Assistance Other Other Other Weekly Monthly Quarterly Yearly Goals Total Income WORKSHEET 3: RECORD OF BUDGETED OR ACTUAL EXPENDITURES Date Started __________ Date Ended __________ Actual Expenses: Month 1 Actual Expenses: Month 2 Actual Expenses: Month 3 Actual Expenses: Month 4 Amount Planned or Budgeted Per Month or Pay Period Income Expenses Housing Utilities Insurance Transportation Food Clothing Entertainment Savings and Investments Health Care Family Personal Care Donations Education Professional Expenses Miscellaneous/ Taxes Credit Payments Total Expenses Amount of Unused Income Personal Money Management Inside you will find information on: What is a personal money management plan? How can you get started developing your own money management plan? What kind goals and priorities are important for your family? Important points to remember about your personal money management plan. A chart for you to document your income and expenses, and a four-month spending worksheet. Written and Prepared by: Our Place, D.C. 1238 Pennsylvania Ave, SE Washington, D.C. 20003 Phone: (202) 548-2400 Fax: (202) 548-2403