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managing money for dummies

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					                                  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 people express these very same frustrations. Sometimes we splurge on a personal item or
an expensive 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:
Personal Money Management is a plan for
managing and spending income. It tells you how             You can plan how to spend your
much money you have and how much you’ve                     money so that you don’t get into
spent. It also tells you how much you can spend in          financial trouble.
the future. It tells you what you can afford and
                                                         You will be in complete control of
when you can afford it.
                                                            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.   Listing your expenses.
2.   Listing your sources of income.
3.   Comparing income and expenses
4.   Setting priorities and making changes so that your income will be greater than your expenses.

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      Fixed or   Weekly Monthly   Quarterly   Yearly   Goals
                       Flexible
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
Insurance
Home or Renters
Life
Disability
Health
Auto

Transportation
Car payments
Gasoline
Maintenance/repairs
License/registration
Parking
Taxi
Tolls
Bus/subway
        Expenses           Fixed or   Weekly Monthly   Quarterly   Yearly   Goals
                           Flexible
Clothing
Clothing
Laundry
Dry Cleaning

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/co-
payments
Caregiver fees

Personal Care
Barber/beauty shop
Cosmetics/toiletries
Expenses                     Fixed or   Weekly Monthly   Quarterly   Yearly   Goals
                             Flexible
Family
Personal allowance
Child care
Allowance (children)
Child support

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   Fixed or   Weekly Monthly   Quarterly   Yearly   Goals
                   Flexible
Credit Card
Department store
Student loan
Other loan
Other loan
Other

Total Expenses
WORKSHEET 2: INCOME

           Income          Weekly   Monthly   Quarterly   Yearly   Goals
Paycheck
Paycheck
Dividends
Interest
Social Security
Pension
Gifts
Alimony
Child Support
Unemployment
Educational Scholarships
SSI
Public Assistance
Other
Other
Other
      Total Income
WORKSHEET 3: RECORD OF BUDGETED OR ACTUAL EXPENDITURES

Date Started __________          Date Ended __________

                 Amount Planned or   Actual      Actual      Actual      Actual
                 Budgeted Per        Expenses:   Expenses:   Expenses:   Expenses:
                 Month or Pay
                 Period
                                     Month 1     Month 2     Month 3     Month 4
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