Monday, May 28, 2007

Know What You Spend

Once you’ve decided to budget for yourself, this is the first real step in building the budget. The key to this step is to save all of your receipts for the month, and at the end of the month add them up.

You will learn things like:

How much going out to dinner costs you a month (when we did this it was over $400, or about 1 fifth of what we make in a month).

How much do we spend on groceries.

How much do we spend on things we don’t need.

Who has the most expensive shopping habits.

Categorize the expenses, make the categories important to you, and figure out the percentage of your income that each expense category covers. Compare it to my personal percentage goals.

20-30% Housing (rent or house payment)
10-20% Savings / paying off debt once you’ve saved 3 months pay.
10% Giving (church, charity, etc.)
5% Gifts (friends relatives loved ones)
25-30% Living expenses (food, bills, cars, insurance minimum debt payments)
Anything left over can go towards fun stuff, or paying off debt

This is a general guideline for an effective spending percentage, and it will be a good comparison to your own expenses.

Also, a greater income could skew these numbers a bit because there is only so much money one can spend on food, living expenses, etc.

Post and let me know how your numbers compare, I may be able to see things that you gloss over.

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