Finance Blog

Developing a Budget Plan

Personal Finance

In relation to your finances, if you don’t know where you have been it is hard to know where to go. By creating a budget plan, you can make better decisions on how to spend your hard-earned dollars. You can then find ways to reduce your debt.

Creating a budget plan isn’t difficult, but it does require a bit of dedication. The first thing you need to do is to find out how much you are currently spending and on what. The best way to do this is to keep track of your family’s spending for one month. Jot down everything your family spends money on in a little notebook. At the end of the month, sit down with your family and try to determine where you can save. There is sure to be money spent on little items (that may even add up to big dollars) that you can save on. The money you ‘find’ to save from your budget plan can then be used to pay down your debt.

When you are creating your budget plan, include the things that must be paid first, and put the least important things at the bottom. Here is a list of budget guidelines that may be helpful:

Housing Costs:
This should include or mortgage or rent payments, utilities, home insurance, property taxes, and home maintenance

Transportation Costs:
This should include car payments, insurance, licensing fees, car maintenance and repairs, gas and parking charges.

Living Expenses:
This should include food, clothing costs, child care, medical expenses, and entertainment.

Debt Expenses:
List all your consumer debts here such as credit card payments, student loans, any installment contracts, personal loans or line-of-credit payments.

Savings:
Put aside at least 10% of our income into a savings plan.

Wants:
List your wants here and set a dollar value on them. This could include anything from that new car to a new entertainment centre, or even a vacation.

Of course, everyone knows that housing, transportation costs and living expenses should be paid first. But some people fail to include entertainment in their living expenses column and think that they should be included in the “Wants” category. A budget will only work if it is ‘livable’, and by that it means that it is one that you can live with. You need to be able to enjoy life a little and you are going to spend on entertainment no matter what, so it is included fairly high up on the ‘paid first’ hierarchy.