Budgeting - making plans for your money

In my last posting, Dealing with Debt: taking charge of the problem, I asked you to do some homework. Specifically I asked you to put together a list of all of your debts and to write down all of your monthly income and expenses.

The next step (and the subject of today's posting) is to prepare a budget.

For some reason, the idea of a budget scares a lot of people - all we're really talking about is plan for spending your money. We take a look at how you've spent your money in the past and based on that we decide how you want to try and spend your money in the future. We say try because a budget is just a tool - just becuase you've written down that you plan to spend $500 on groceries that doesn't mean you are going to. It is up to you to stick to the plan, but we'll talk more about that in the next posting.

So, what do we do with the information that you have gathered. First, set the list of debts aside, we'll come back to them later.

Let's start with your monthly income. Ask youself these questions about each of the income items you wrote down:

(1) Do I receive this money every month? For instance, if we're talking about your paycheque then you probably do. If you're talking about a GST cheque from the government then you probably don't.

(2) Do you know which day(s) you will receive this income? For instance, do you get paid every other Friday? If it's a government pension you might receive it on the 21st or maybe the 28th.

(3) Is it always the same amount? Does the income amount change every month (or every pay?)

Once you have answered these questions you can write down the total income you expect to receive next month. If you want to be really detailed, write the amounts down on a calendar on each of the days you expect to receive them.

The first half of your budget is done - now that wsn't so bad was it? The next posting will deal with your expenses and things may get a little more complicated.

If you are already finding this more than you can comfortably deal with you may want to contact someone locally to give you some help.

Posted by Ted Michalos, CA trustee @ 12:41 PM

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