Budgeting 101 - personal finance - Brief Article - Statistical Data Included

Black Enterprise, April, 2001 by Marie Evans

Tips to help you get and stay on financial track

How would you like to have a balanced checkbook, an emergency fund to pay for inevitable expenses, or extra money to start investing? Perhaps you have fantasies about a regal retirement on the golf course or in your exquisite backyard orchid garden. Well, you can. All you need is a pen, paper, and a few guidelines.

"Most people need to be more conscious of their spending habits," says Madeline Moore, CFP, in Portland, Oregon. "A financial plan for your family does not just spontaneously appear. You have to make it happen," she adds.

Only 45% of American families have taken the time to implement a written budget, reports the Larry Burkett Budget Online Guide. Well, you're not going to be part of that wavering group. Get ready to map out a better life in three easy steps:

* Step 1: Adding up your income and expenses. Use the following worksheets to calculate your cash flow. First, add up the bills (the total is your expenses). Subtract those expenses from your net income (take-home salary, plus child support, alimony, etc.). If you are in negative territory, see where you must cut expenses (this is where your "spending diary" will come in handy). If you're "in the black," analyze places to cost-cut. Put that money into more sensible interest-bearing spots like investments, money market funds, or even certificates of deposits.

* Step 2: Keeping a diary. Many experts advise keeping a "spending diary." In this diary, jot down everything you spend money on, from the mortgage payment right down to the daily pack of gum. Within two months, this diary will show you exactly where you are wasteful or overindulgent. Say you can't do without that morning cappuccino's frothy kick. Don't deprive yourself completely, just opt for a less-expensive alternative like almond-flavored coffee. The $1 difference can add up to more than $365 annually.

Other areas where you can whittle down may include weekend outings. Peak-time chats on cellular phones while sitting in expressway traffic may be another money magnet, explains Allyson Lewis, New York City-based retirement specialist and author of The Million Dollar Car and $250,000 Pizza (Dearborn Financial Publishing, $18.95).

* Step 3: Create and follow a budget. Use the hard copy of"Budget Worksheets" in Lewis' book to get started.

These three steps are guaranteed to assist you in creating a maintainable budget that will ultimately help you obtain any and every financial goal. As the saying goes, "You can't plan for today tomorrow, but you can plan for tomorrow today."

Budget Worksheet 1

Let's get started. Gather checkbook records, itemized credit card bills, tax utilities receipts to calculate your expenses, month by month for the past year. Use this sheet to tally your expenses--"cash outflow."

Mortgage/Rent                --
Property Tax                 --
Loans, credit cards, debts   --
Utilities                    --
Telephone                    --
Beeper, Pager                --
Cellular Phone               --
Groceries                    --
Tobacco/Alcohol              --
Restaurants                  --
Transportations              --
  Car payment                --
  Repairs                    --
  Gas                        --
  Registration               --
Clothing                     --
Medical                      --
Entertainment                --
  Cable                      --
  Movies                     --
  Videos                     --
  Vacations                  --
Gifts                        --
Education                    --
Charitable donations         --
Other                        --

Total                        --

Once you have this information, look for a way to cut costs in each category. After nipping away at expenses, you will officially be on a "budget".

Budget Worksheet 2

Now, grab pay stubs, receipts, invoices, deposits slips and figure out your month-to-month income, over the past year. DO NOT include "one-time-only" sources of income. In general, such windfalls as a small inheritance or particularly plump tax refund should automatically go into your emergency savings account expecially if you are a novice.

Wages                --
Tips                 --
Second Job           --
Odd jobs             --
Child                --
Alimony              --
Interest/Dividends   --
Rents                --
Reimbursements       --
Other                --

Total                --