BUDGET - CONSUMER FINANCES101
INTRODUCTION
How can you make a tight budget work? - Or increase your buying power - up to double?
The answer is to establish and use your funds instead of credit.
You only earn so much in your lifetime. Your lifetime earnings are a finite amount.
You must be prepared for the unexpected. That is your contingency fund.
You must also establish a savings account to purchase your consumer goods from.
THE BASICS
You must have a plan - minimum six (6) months.
You must have a budget. - minimum six months. Budget a little higher than expected.
It is highly recommended that you keep all receipts in order to accurately maintain your records.
THE TOOLS
Funding & Spending Plan - Draft your Six Month Funding & Spending Plan
Fill-in the name of the month.
Cash Flow Register, 12 Months - Record your spending per the items/categories of your Plan.
Fill-in the name of the month, the Expense & Funding items and record your expenses. - Keep Receipts.
You should always be at or under budget per item, if not back to your Funding & Spending Plan to correct.
BUDGET - CONSUMER FINANCES - 101
The following is an example that focuses only on the big picture, which is a view of your finite lifetime earnings and your buying power. Your budget and plan will have to be more detailed. But you need the big picture: First, an example, if you were going to make $20,000 per year for the next 20 years. You can multiply out your expected yearly earnings by the number of years that you have left to work. That would equal about $400,000. Now you can see that you could buy $200,000 worth of consumer goods if you had to finance them and pay an additional $200,000 in interest. Or if you paid cash for everything you could purchase $400,000 worth of goods.
The contingency fund allows for you to pay for that new car battery, the parking ticket, and the extra cash that was spent because something just cost more than budgeted. This includes cost for entertainment.
Repayment of the contingency fund must be scheduled and made and in there for the next unexpected
contingency. How Much? $1,000 works for most folks under most circumstances. Please note: Many finance planners suggest six (6) months of expenses be saved for an emergency. This is ideal. And, after your finances are under control, you may revisit this six (6) months of contingency funds, especially when you are considering starting savings or retirement accounts. Fill-in the day that you will receive your pay, rent and other items. Then under the heading item list the item, pay, rent, etc. Indicate each item as either a positive (+) or negative (-) amount. Next forecast the balance by adding/subtracting just like you would a checking account. Budget on the high side. I have provided a fill-in the blank six (6) month Funding & Spending Plan. It works for most consumers. If it does not work for you, then you may have to modify it. Also I have provided a list of potential funds and a list of potential expenses. The list is not exclusive. Finally I have provided a Cash Flow Register, 12 Months for you to record your expenditures. Desirable furniture, electronic equipment, clothing must be purchased out of a savings account for consumer goods not on credit. Then you have improved your buying power. Your plan and budget must include a contingency fund and a saving account for consumer goods. You must continually update your plan and budget to reflect changes in funding, expectancies and contingencies. At first this will take more attention. Later it will be easier. But your watch over your budget must be as vigilant as a lookout for a ship at sea.
Final Note: If you were going on a trip by car. You would need a destination and a map. If you don't watch where you are going who knows where one would end up? Many find themselves where they want to be, they make a plan and stick to it. Good Luck & God Bless.
How can you make a tight budget work? - Or increase your buying power - up to double?
The answer is to establish and use your funds instead of credit.
You only earn so much in your lifetime. Your lifetime earnings are a finite amount.
You must be prepared for the unexpected. That is your contingency fund.
You must also establish a savings account to purchase your consumer goods from.
THE BASICS
You must have a plan - minimum six (6) months.
You must have a budget. - minimum six months. Budget a little higher than expected.
It is highly recommended that you keep all receipts in order to accurately maintain your records.
THE TOOLS
Funding & Spending Plan - Draft your Six Month Funding & Spending Plan
Fill-in the name of the month.
Cash Flow Register, 12 Months - Record your spending per the items/categories of your Plan.
Fill-in the name of the month, the Expense & Funding items and record your expenses. - Keep Receipts.
You should always be at or under budget per item, if not back to your Funding & Spending Plan to correct.
BUDGET - CONSUMER FINANCES - 101
The following is an example that focuses only on the big picture, which is a view of your finite lifetime earnings and your buying power. Your budget and plan will have to be more detailed. But you need the big picture: First, an example, if you were going to make $20,000 per year for the next 20 years. You can multiply out your expected yearly earnings by the number of years that you have left to work. That would equal about $400,000. Now you can see that you could buy $200,000 worth of consumer goods if you had to finance them and pay an additional $200,000 in interest. Or if you paid cash for everything you could purchase $400,000 worth of goods.
The contingency fund allows for you to pay for that new car battery, the parking ticket, and the extra cash that was spent because something just cost more than budgeted. This includes cost for entertainment.
Repayment of the contingency fund must be scheduled and made and in there for the next unexpected
contingency. How Much? $1,000 works for most folks under most circumstances. Please note: Many finance planners suggest six (6) months of expenses be saved for an emergency. This is ideal. And, after your finances are under control, you may revisit this six (6) months of contingency funds, especially when you are considering starting savings or retirement accounts. Fill-in the day that you will receive your pay, rent and other items. Then under the heading item list the item, pay, rent, etc. Indicate each item as either a positive (+) or negative (-) amount. Next forecast the balance by adding/subtracting just like you would a checking account. Budget on the high side. I have provided a fill-in the blank six (6) month Funding & Spending Plan. It works for most consumers. If it does not work for you, then you may have to modify it. Also I have provided a list of potential funds and a list of potential expenses. The list is not exclusive. Finally I have provided a Cash Flow Register, 12 Months for you to record your expenditures. Desirable furniture, electronic equipment, clothing must be purchased out of a savings account for consumer goods not on credit. Then you have improved your buying power. Your plan and budget must include a contingency fund and a saving account for consumer goods. You must continually update your plan and budget to reflect changes in funding, expectancies and contingencies. At first this will take more attention. Later it will be easier. But your watch over your budget must be as vigilant as a lookout for a ship at sea.
Final Note: If you were going on a trip by car. You would need a destination and a map. If you don't watch where you are going who knows where one would end up? Many find themselves where they want to be, they make a plan and stick to it. Good Luck & God Bless.