Your Budget. Blueprint Main Street - P.O. Box 1105 Lewiston, ID 83501

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1 Your Budget Blueprint Main Street - P.O. Box 1105 Lewiston, ID 83501

2 Planning Goals and Objectives There are few places where planning is more necessary than in our financial lives. As consumers, we are dealing with a limited resource, our income, and a seemingly never-ending number of demands on that income. In a society so inundated by the marketing efforts of Madison Avenue, we have to wade through an ocean of options competing for our money. The advertisers have become very good at convincing the public that we need and deserve an array of products that were unheard of even 10 years ago. It is our challenge to sort through all the options and make choices and decisions that truly fulfill our values and goals. The Goals and Objectives worksheet is a place to list specifics related to the values along with the estimated cost and target date of completion. The sheet is divided into three sections: Short Term for completion in less than one year. Perhaps saving for a trip. Medium Term for one to three years. Saving for a down payment on a car. Long Term goals for things that will occur more than three years from now. Saving for a child s college education or a down payment on a home. I always encourage people to fill out two copies - one for their personal financial goals and one for their financial goals for the family. If you are part of a couple, put the lists together so you can come up with shared goals and individual goals. And so we begin. Any meaningful financial plan has to begin by first determining what has value or meaning to you and your family. Take some time with this. Have everyone write down four things that mean the most to him or her. The list may include home, education, family, travel, a car, security, saving for retirement or anything else. With those values in mind, fill out the Goals and Objectives worksheet. Short Term (Less than one year) Objective Estimated Cost Target Date Monthly $ Medium Term (One to three years) Objective Estimated Cost Target Date Monthly $ Long Term (More than three years) Objective Estimated Cost Target Date Monthly $

3 The Miscellaneous Worksheet The Map Category Weekly Monthly Annually Adjusted Adjusted Alcohol Allowances Casino/Lottery Tickets Checking Fee Children s Activity Charity Church Cigarettes/Tobacco Club Fees Diapers Fast Food/Meals Out Gifts/Cards Hair Cuts/Perms Hobbies/Crafts Lunches (School/ Work) Movies/Entertainment Newspapers/Magazines Pawn/Pay Day Loans Pet Food/Vet Postage Union Dues Use the blank lines to add expense areas that are specific to your spending plan. The first thing every journey needs is a destination in mind. Many people wander aimlessly in their financial journey. Establishing goals and objectives helps you pinpoint the destination. The route traveled makes a great difference in how long and how expensive the trip becomes. In reaching your financial destinations, a good spending plan is the essential map. To start the spending plan, take at least a few weeks to gather information about your current spending patterns. You need to know where you are currently spending your money. Advisors often tell people to carry a notebook and write down every expenditure for a month. Use that information as the starting point for the spending plan. Another approach is to carry an envelope and each time you make a purchase, put the receipt in the envelope. If you make a purchase for instance, for a soda from a machine, and don t get a receipt, jot the purchase down on the back of the envelope or on a slip of paper in the envelope. Then, at the end of the month, categorize and total all of the receipts. You ll be surprised at what you find. Oftentimes, the spending plan fails because incidentals are overlooked in the planning process. To help you identify those incidental expenses, I have provided a Miscellaneous Worksheet. The two additional columns at the right are for adjusting the expenses to fine-tune the spending plan. Remember that the spending plan needs to deal with the reality of your spending habits. You can t make someone stop by omitting it from the budget.

4 The Unexpected and the Expected One value of doing a spending plan is that you can put money aside for the expenses that are likely to happen. When they do happen, you will have to find the resources to deal with them. If you have been saving money for them, you have a better opportunity to reduce the cost and the stress they cause. Look at these expense areas and project how much you may spend in a year for each. Then divide that amount by 12 to see how much money you need to put aside each month to cover them. Auto Maintenance Tires Licenses Housing Maintenance Replacing Appliances Lawn Care Gardening Medical and Dental Deductible Co-Pay Prescriptions Clothing Dry Cleaning Replacement Holidays/Birthdays Gifts Wrapping/Cards Parties/Meals Home Decorating Category Annual Monthly Making the Spending Plan Having completed the miscellaneous worksheet and planned for the expected and unexpected, it is time to build the spending plan. Use a pencil to work up the spending plan. You may want to make some changes. The following numbered steps correspond to the numbers that you will find on the example spending plan on the next page.

5 Spending Plan (Example) Instructions 3. Rent/Mortgage $ Property Taxes Maintain/ 1st Week 2nd Week 3rd Week 4th Week Os Utilities - Power Phone/Cell Internet Water/Sewer/ Garbage Cable Food C 100 C 100 C 100 C Transportation - Loan Gas & Oil C 20 C 20 C 20 C Maintain/ Os Medical/Dental - Deductible Os Life & Disability 9. Clothing Cleaning/ing Os Taxes/Licenses 3. Checking Deductions Childcare Child Support 3. Savings S Miscellaneous C 40 C 40 C 40 C Debt Payment 177 TOTAL EXPENSES $ (1330) 5. $160 $740 (670) $ Net Income #1 $1100 $ Net Income #2 $450 $ Misc. Income (Food Stamps, etc.) 2. TOTAL INCOME $1550 $900 LESS EXPENSES 7. $1390 $160 $740 $160 REMAINS $160 0 $ Enter the take-home pay for the applicable week. In the example, income 1 nets $1,100 in the first week and $450 draw in the third week. Income 2 nets $450 in the first and third week. 2. Total the income for each week. 3. Enter the payments that have a specific due-date, such as the rent/mortgage, utilities, child support, etc. 4. Monthly food, gas and miscellaneous are divided by 4 to give a weekly amount. 5. Total up the amount needed to cover food, gas and miscellaneous for the week. 6. Subtract the sum in number 5 from the total income in line This is the amount that can be spent in the first week. 8. Total the expenses already listed in the spending plan and pencil that amount under the TOTAL EXPENSE heading. 9. The money that remains will be divided among the reserves* you are developing for the expected and unexpected. 10. Follow the same procedure for the next pay period. *Reserves Os - Operating Savings C - Cash S - Savings - Checks

6 Cash Flow Spending Plan The Spending Plan is set up as a weekly cash-flow chart to demonstrate how you need to carry money over. Most of us don t have the ideal situation where the right amount of money comes in just as we need it. Some people are paid once a month and have the challenge of making sure there is not more month than money. People who are paid weekly have the challenge that none of the paychecks are large enough to deal with the large expenses. In the first week of the example, they take home $1,550 from two employers. This is the week when they pay big bills, like the mortgage. They put $1,330 in their checking account. $60 go into their savings account and take out $160 in cash. The cash is used for gas and groceries, and any remaining is used for hair cuts, lunches, or other items the family designated as miscellaneous. In the second week, they have no paychecks come in but will still need gas, groceries, etc. The $160 designated for those expenses was in the money they put in their checking account. After getting money out of their account, they proceed as they did the first week, except there are no bills to pay. continued on the next page Rent/Mortgage Property Taxes Maintain/ Utilities - Power Phone/Cell Internet Water/Sewer/ Garbage Cable Food Transportation - Loan Gas & Oil Maintain/ Medical/Dental - Deductible Life & Disability Clothing Cleaning/ing Taxes/Licenses Checking Deductions Childcare Child Support Savings Miscellaneous Debt Payment TOTAL EXPENSES Net Income #1 Net Income #2 Misc. Income (Food Stamps, etc.) TOTAL INCOME LESS EXPENSES REMAINS 1st Week 2nd Week 3rd Week 4th Week

7 Spending Plan Cash Flow continued Rent/Mortgage Property Taxes Maintain/ Utilities - Power Phone/Cell Internet Water/Sewer/ Garbage Cable Food Transportation - Loan Gas & Oil Maintain/ Medical/Dental - Deductible Life & Disability Clothing Cleaning/ing Taxes/Licenses Checking Deductions Childcare Child Support Savings Miscellaneous Debt Payment TOTAL EXPENSES Net Income #1 Net Income #2 Misc. Income (Food Stamps, etc.) TOTAL INCOME LESS EXPENSES REMAINS 1st Week 2nd Week 3rd Week 4th Week The third week has another set of paychecks. This time the net totals $900. Of that they will put $570 in checking and take $160 in cash. Though they have less money coming in on this pay period, they also have fewer expenses. This is the time they put some money in their long-term savings account. It is important that savings is a line item on the budget. People who save whatever is left over end up saving nothing. The fourth week works just like the second week did. A Few Words of Caution Checking accounts are a great tool, but just like any other, if it is used without care it can do a great deal of damage. With fees, a bounced check can turn a $5 mistake into a $65 headache. If the check goes to court, you can be charged for the check, the NSF fee, a penalty equal to three times the value of the check and a collection fee. You may also be charged court costs and attorney fees. If a judgement is obtained, it will go on your credit bureau report and remain part of your record for seven years. If you have a problem with checking accounts, use money orders for bill paying. If you use cash, it is essential that you get a receipt.

8 People committed to life.