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Monthly Expenses (and Budgeting)

We have so many things that happen every month how can we possibly have time to organize and worry about what we spending? Besides, who likes doing this anyways? What you really should be asking yourself is 'How come i'm not for financially organized?'

To keep yourself from getting into financial trouble, you need to keep your money organized. The most common way to do this is utilizing the 'B' word - Budget. Everyone should have a budget: the kid who mows lawns or earns an allowance for chores, to the college kid to grandparents.

Where do you even start? We suggest that for a couple of months (present or past) all you do is categorize how you spend your money. Common categories are: rent/mortgage, groceries, eating out, utility bills, phone bill, etc. The way that I have found best to do this to set aside time, an hour or so, each week to categorize your what you bought. You can do this in a variety of ways, from excel to your bank's budgeting tool, or use a third party software.

Each Saturday morning the first thing we do is our weekly Finance Review meeting (after all it is our money). We go through each transaction and categorize them according to what is it: eating out, home furnishings and decor, bills, etc. We do this so we know where we are at and how much we have left to spend.

After, you categorized a month or two, you can start to get a picture of where you are currently spending your money. You know how much money you make each month (or should have a pretty good idea) and you know how much you fixed expenses are (rent/mortgage, phone bill, etc.). So start off by getting your monthly take home pay and subtract each fixed expense, then subtract out the comfort expenses and savings. If you have any left over increase your savings amount (for more details you'll have to sign up for coaching).

About 30% of your income should be going towards your house (rent/mortgage, utility bills, etc.) and another 15% you should be putting away for retirement (with a few exceptions). Beyond those two items it is difficult provide more info on the "perfect" budget. Everyone is in different circumstances and places; what might work for Joe in New York may not work for Mary in Iowa.

Bottom Line:

Budgets help keep us on track and avoid financial ruin.