spending in the dark

SPENDING IN THE DARK

Bill TaylorUW Extension

Northeast Area Community Development Educator

CHRISTMAS IS COMING!!How many $$ can you afford?How much did you spend last

year?How much do you have set aside

for Christmas spending?How much can you afford to set

aside next year for Christmas spending?

OTHER SPECIAL EVENTSHow do you plan spending for:

◦Birthdays?◦Vacations?◦Graduation?◦Etc.

PERIODIC SPENDINGHow do you plan for larger

expenses that only happen now and then?◦i.e.

Property taxes Car license Car and homeowner’s insurance Major repairs or maintenance

LIGHTING UP THE DARK

Unless you use some proven methods, handling these types of expenses is like shooting in the dark at a moving target.

TRACK YOUR SPENDING

You are spending in the dark until you know what your NEEDS and WANTS are costing you

THE DARK

THE DAWNINGTrack your expenses

◦Save a receipt for EVERY purchase◦For 3 months – for average and

accuracy◦Every nickel, dime, and dollar

Write yourself a paper receipt when you don’t get one from the vending machine, etc.

◦Every week sit down with your receipts and record your expenditures on a spending record, within categories

ENTERING EXPENSESEnter weeklyTotal monthly

◦Add all the category totals to check your total spending for the month

SET GOALS

FINANCIAL GOALSDetermine your major household

financial goals◦i.e. – down payment on a home,

paying off debts, new car, etc.◦List them◦Determine a time line or deadline for

each◦Determine a cost for each◦Prioritize – which comes first?

KEYKey to goal accomplishment:

◦WRITE THEM DOWN◦REVIEW THEM EVERY TIME YOU PAY BILLS

They become part of your subconscious mindset

ESTABLISH BUDGET

DEVELOPING A BUDGET

Most accurate after 3 months of tracking expenses◦But you don’t have to wait 3 months

to startList total anticipated income for

an average monthList anticipated expenses for an

average month◦Divide the expenses into groups to

help in deciding how much they will be

EXPENSESTwo ways to group

◦Needs vs. Wants Needs – what you have to have to live

Basic food, rent/mortgage, basic transportation, minimal clothes, medical, insurance, etc.

Wants – extras for comfort and enjoyment Entertainment, electronics, snacks, knick

knacks, eating out, etc. Be careful you don’t justify wants as

needs Needs must be paid before wants are

considered

EXPENSES (cont.)

Two ways to group (cont.)

◦Fixed vs. Variable Fixed – the same each month

Few basic bills Relatively easy to list

i.e. rent, housing payment, car payment, insurance, child care, etc.

Variable – varies month to month i.e. food, clothing, medical, entertainment, gas

& oil, etc. Must track over several months to be accurate

Repeat whenever situation changes or the budget needs major adjustments

PERIODIC EXPENSESList those periodic expenses we

started the lesson discussing◦Determine how much you need or

want to spend on each i.e. bi-annual property taxes - $1000,

Christmas gifts - $500

PERIODIC EXPENSES (cont.)

◦Determine how many months you have to put money away for each and divide that number into the total amount Property tax - $1000 ÷ 6 mo. = $167/mo. Christmas gifts

Saving all year - $500 ÷12 mo. = $42/mo. Starting in August - $500 ÷ 4 mo. = $125/mo.

Decide whether the periodic expense is a fixed or a variable expense and list the monthly amount in that group

BUDGET COMPLETIONList anticipated:

◦ Income Total

◦Fixed Expenses Total

◦Variable Expenses Total

Subtract total Fixed & Variable expenses from total Income◦ Is there enough income to cover the

expenses?

NEGATIVE BALANCEIf final budget figure is a

negative, you MUST change something◦Increase income◦Decrease expenses◦Dip into savings - this can’t continue

Next month: December 5 @ 7:00 p.m.:  Communication about Finances and Estate Planningby Cole Ehmke, Extension EducatorGo to http://www.uwyo.edu/ces/money/