Welcome back! You came back, right? Because this week we’re tackling the money, honey. We’ll accomplish steps in the plan to understand income and expenses, following Stacey’s continued guidance. And if you’re anything like me, you’ll want a calculator handy.
Hi everyone! It looks like we didn't have anyone share their financial goals with us, but that's okay- I still look forward to setting you up with the power to make them reality. Even if you didn’t share your financial goals out loud, you set them, and that’s what’s important.
Now comes the math.
Add Up Your Income
Make sure you include all sources of income such as your salary, child support, interest and your spouse’s income. When you are calculating your income, use your net income (take home pay) and don’t include overtime or bonuses since these aren’t always guaranteed.
Create A List Of Monthly Expenses
Think of everything you pay for on a monthly basis whether it’s a fixed expense (the amount stays the same every month) or a variable expense (the amount can change month to month). When you’re trying to figure out what to record for variable expenses (like gas, groceries and entertainment) you can either go with the worst case scenario or take an average of the last several months.
This is where online banking and bill pay can really come in handy since you can look at a history of your payments. If you like money management tools, I encourage you to play around with the money manager feature in your online banking, too.
List Your Debts
Record the minimum payment for all of your debts and then add them all together. Even though this could fall under the monthly expenses category, it’s a good idea to have them on a separate list so you know who you owe, how much you owe and the interest rate. This way your debt is front of mind and you can work on getting it paid off.
It’s important to plan for periodic expenses and set aside money for them each month. A periodic expense is anything that you don’t pay on a monthly basis. For example, car tabs, birthday and holiday gifts, vacations, tuition and clothes. Figure out how much you are spending on these items throughout the year and add them all together. Now you can divide that total by 12 to find out how much you should set aside each month to cover your periodic expenses throughout the year.
You might even consider opening up a separate checking account to keep the money in along with a separate debit card (labeled “periodic expenses”) that you can use for that account. That way, when the expense pops up, you have the money in that account ready to go.
Whew, that’s a lot to cover- time to go forth and calculate. Take your time outlining your expenses and feel free to ask questions or share your experiences in the comments below. Cheers, KristinA