Where Does Your Money Go?

Many people have no idea what happens to their money. It just
seems to “disappear.” Here’s how to out how where
yours goes:

1. List the bills you pay every month.
2. For one month, jot down everything you buy and the
   price—no matter how little it costs.
   At the end of the month, categorize the items you’ve listed:
   “Food,” “Transportation,” etc. Then break down each category;
   for example, “Food: School Lunches, Snacks, Restaurants.” Now
   you know where your money goes.
   The Urge to Splurge Advertising and peer pressure tempt
   us to buy things we don’t need. Which of the items you
   categorized above were things you needed, like gym shoes or
   an ink cartridge? Which ones were things you just wanted:
   take-out pizza or that CD you played only once? Those are
   impulse purchases. They don’t seem expensive when you buy
   them, but they can keep you from reaching larger goals like a
   vacation, a cool car, or college.
   Think Before You Buy Before you buy an item, ask
   yourself whether the item is worth the time you’ll have to work
   to pay for it. The better you get at saying “no” to unnecessary
   spending, the more money you’ll have for what’s important
   to you.
   Creative Budgeting
   Using the expenses you listed before, complete a chart like the
   one on the next page. Look at each expense in column 2 and
   think of ways to reduce it. Enter the lesser amount in column 3,
   your New Budget. Be sure to budget 10 to 30 percent of your
   income for “Savings.” (To see why, go to Saving and Investing
   Skill.) Total column 3 to see if your budget matches your
   income. If not, you’ll need to keep trimming expenses until it
   does or another source of income.
   Personal Finance Handbook
   Budgeting:
   Take control of your cash
   Did you really need that cashmere sweater or those $200 sneakers? How
   did you get $5,000 in debt? Getting control of what you spend—budgeting—is a
   skill you’ll need throughout your life.
   ETT_EM_R1_R33_FinHndbk.indd R4 2/2/10 9:56:53 AM
   Building Your Budget
   Part-time Job: $______
   Monthly allowance: $______
   Total income: $______
   Spending Category Current Expenses New Budget
   Food:
   School lunches
   Restaurants & take-out
   Snacks
   Transportation:
   Car payment
   Insurance
   Gasoline
   Maintenance (estimate)
   Entertainment:
   Movies
   Music
   Games
   Sports and hobbies
   Personal care:
   Clothes
   Shoes
   Haircuts
   Accessories
   Cosmetics
   Savings (10–30% of income)
   Utilities:
   Phone
   Internet access
   Medical/dental
   Donations to charity
   Miscellaneous

Test Your Financial Fitness

1. Listing List five ways you can start saving money. How much could
   you save in a year by cutting these costs?
2. Explaining Why is it important to live on a budget?
3. Applying Choose a career you like and research its average annual
   salary. Using that salary, construct a one-year budget plan using the
   budget worksheet above

Sample Solution

The post Where Does Your Money Go? appeared first on use litetutors.