Balancing Income and Expenses

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Money and Marriage
Issue 3. Balancing Income and Expenses

$ Know Budget Basics • $ Make a Monthly Spending Plan • $ Plan for Periodic Expenses

If you received a gift of $5,000, what would you do with it? Pay bills? Put it in a savings account? Buy clothes? Make a down payment on a car? Buy a big screen TV? Would you and your spouse agree on how to spend the money?

A spending plan is essential to keep track of where your money is going. It's a simple process that keeps expenses in line with income. Think of a spending plan as a road map that gives you direction and helps you to see when you're headed in the wrong direction – financially.

$ Know Budget Basics

Use these words to complete the statements and increase your knowledge about spending plans.

Business	Income	Debt	Values
Expenses	Written	Goals

1. Running a household is like running a small _____________. In order to stay out of the red, it is necessary to keep accurate records of income and expenses. Couples who develop and follow a spending plan are more likely to operate their household in a businesslike manner.

2. A spending plan is a tool for achieving long-range _____________. Immediate goals can be covered from paycheck to paycheck; however, in order to achieve future goals, a couple must have a plan to save a certain percentage of their monthly income.

3. A spending plan helps couples to live within their _____________. There are families who seem to have a knack for making ends meet. The difference is not the amount of money they have, but the fact that they are better managers of their resources. These families have learned the value of planning and recordkeeping. They follow spending plans.

4. One of the best ways to stay on track with a spending plan is to stay out of _____________.

5. There are two major parts of a spending plan – Income and _____________.

6. Before developing a spending plan, it is a good idea to keep a _____________ record of your income and expenses for two or three months. This helps you to establish a more realistic and accurate plan that you are able to stick with.

7. The way you decide to spend your money depends upon your _____________. Before making a spending plan, talk with your spouse about your needs and the things that are most important to you. If both of you take part in making the spending plan, you will feel better about it and work harder t make it a success.

See correct answers at end of the article.

$ Make a Monthly Spending Plan

The first step in making a spending plan is to figure your income and estimate your expenses. If you keep a written record of what you actually spend for a month or two, your estimated expenses will be more realistic.

Use the form to record income and expenses. Finally, subtract your total expenses from your net income. If the result is negative, look for ways to cut back. Your goal is to balance your income with your expenses.

For more information, read Financial Fitness Series: Shape Up Your Spending.

GROSS INCOME		$

	Minus taxes and other deductions

	NET INCOME			$

Estimated Expenses
Housing
Food at home
Food away from home
Clothing
Clothing care
Life insurance *
Car/Truck payments (s)
Car/Truck insurance
Gasoline
Utilities (gas, water, electricity)
Cable TV
Telephone(s)/Cell phone(s)/Internet connection
Home furnishings/appliances
Credit card payment(s)
Other loans
Personal Care
Health insurance*
Health care (doctor, dentist, medicine)
Household supplies
Recreation
Emergency fund/savings
Savings for periodic expenses (See next item - Plan For Periodic Expenses)
Miscellaneous (pets, hobbies, club dues, subscriptions)

TOTAL EXPENSES		$

DIFFERENCES BETWEEN INCOME AND EXPENSES			$

* Do not include if payroll deducted.

$ Plan for Periodic Expenses

Most spending plans are based upon monthly income and expenses. Some expenses, however, do not occur monthly but rather periodically throughout the year. When a major periodic or non-monthly expense such as car insurance comes due, it may be difficult to pay the entire amount out of one month's income. Planning ahead for major expenses eliminates this problem.

Use the form below to help you calculate how much to set aside each month so you can pa major bills when they come due. In other words, break large payments down into monthly payments to prevent budget from being blown! An example is shown.

Example

Item	Jan	Feb	Mar	Apr	May	June	July	Aug	Sep	Oct	Nov	Dec	Yearly Cost	Average Monthly Amount
Car Service/Tires				35					35		300	35	405	33.75
Taxes – Personal Property										150			150	12.5
Auto Insurance		300						300					600	50.00
Total Amounts		300		35				300	35	150	300	35	1155	96.25*
*Set Aside Each Month

Item

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Yearly Cost

Average Monthly Amount

Total Amounts

*Set Aside Each Month

Answers to Know Budget Basics Quiz.

1. Business; 2. Goals; 3. Income; 4. Debt; 5. Expenses; 6. Written; 7. Values

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Money and Marriage Issue 3. Balancing Income and Expenses

Money and Marriage
Issue 3. Balancing Income and Expenses