Peter Boys, Boys Financial Services

Developing A Budget

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When Developing a Budget, You First Need to Understand Where All Your Money’s Going!

There is nothing wrong spending money; why else do we all work so hard to earn it?

The two keys are:

  • Knowing what we are spending it on, and
  • Knowing that we are only spending what we have available

Harnessing the power of these keys leads us to strategic spending, a process that ensures we are managing our spending rather than our spending managing us.

The problem for many of us with our household spending is that we often have no idea where the money goes each month.  Budgets can be onerous to set and to manage, and let’s face it, they’re seldom fun.  Is there an easier way to track where we are spending and whether we are overspending?

We are less likely to overspend on our monthly bills and fees as these are usually set amounts; however, we should have an idea what those amounts are, so we know what our disposable income is each month on average.  We can provide you with a sheet to do this calculation called the Average Disposable Income Calculation.  Complete this once each year or whenever there is a major change in income or expenses.

Where we are more likely to overspend is in our monthly disposable income, also called discretionary income

When there is not enough in the bank account, we may use our credit cards and lines of credit. For those of us who use our credit cards or lines of credit frequently for purchases, the problem may come when the payment is due. If we do not have enough money, we may choose to pay only a portion of the bill and the balance begins to accumulate, usually at significant rates of interest.

When we struggle with overspending, the problem is likely in the seven following areas:

  • Dining out
  • Entertainment (music purchases, apps, videos, games, movies, books, magazines, etc.)
  • Sports/hobbies/recreation
  • Clothes/shoes
  • Gifts
  • Groceries
  • Alcohol

Remember, it’s not a bad thing to spend money on these things, but they are areas where it is easier to spend more than we can afford.

To get control of your spending, the first step is awareness

To help you organize your spending habits, we have created a very user-friendly Monthly Expense Tracker that shows weekly spending habits (as well as a monthly summary and seasonal expenses) that you can freely download by clicking on the link.

We recommend that you track what you’re spending in thirteen pre-defined areas for a period of three months. At the end of three months, average what you are spending in each category by adding the three monthly totals and dividing by three to help identify any potential trouble areas.

If the disposable spending appears okay, review the set monthly spending and disposable spending to see where cutbacks can be made.  It does take some discipline but, in the end it may also free you up to focus on the things you love most.  So why not become a strategic spender and take control of your money!


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