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Creating a budget
By Lynn Doxon
Americans are deeper in debt than ever before. While medical bills account for a significant portion of this debt, much of it is simply the result of spending more than you make. The only way to know how well you are doing is to create and track a budget.
Financial advisors have calculated recommended percentages of income going to different areas. They are:
Charitable gifts 10 - 15%
Savings 5 - 10%
Housing 25 - 30%
Utilities 5 - 10%
Food 5 - 15%
Transportation 10 - 15%
Clothing 2 - 7%
Medical/Health 5 - 10%
Personal 5 - 10%
Recreation 5 - 10%
Debts 5 - 10%
If your income is limited, a higher percentage of the budget will go for necessities like food and housing and less for personal items and recreation.
To determine whether you fall into the recommended budget percentages, you must know where your money goes. If most of your spending is credit card or checks it is easy to go back through statements and check stubs, enter those in a simple bookkeeping program on the computer and print out a report of spending over the past several months.
Be sure to include whatever cash you withdraw in the appropriate budget category. Do you spend cash on meals eaten out? That would go in the food category. Do you spend cash for things like haircuts, dry cleaning or items for your house? If you buy many things with cash keep track of your cash expenditures for a couple of months to determine where the cash goes. Carry a small notebook with you and record each purchase or keep an envelope in your car and put all receipts in it, then enter those in your computer program.
List income from all sources. Be sure to use either your take-home pay or use gross pay but include deductions in the budget. If you routinely get large tax refunds reduce the amount deducted from your pay. Using the IRS as a savings account is not the best way to have extra money to spend.
Once you have determined where your money goes you can decide how you should be spending it. Use your software to make a budget, then track it monthly. Set up credit cards and bank accounts to download automatically to save time tracking your budget, then monitor it weekly. That way when spending in one area gets out of hand you will be able to spot it quickly and make corrections.
About the Author
Lynn Doxon is the mother of three adopted daughters and two stepsons. She works from home writing books, managing an online business www.bestmarketingeducation.com and helping her husband manage his architectural business and real estate investments. In her spare time, if she had any, she would read and garden
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