Money Matters:  Assets & Liabilities

PRINCE CHARMING DOESN'T LIVE HERE ANYMORE

By Ginita Wall, CPA, CFP

"Some day, my Prince will come" goes the song. But what if he came – and went -- and took half of everything with him? That’s the dilemma of the woman on her own again. And once bitten, twice shy, she may not want to rush into a new marriage.

Most women can expect to spend at least a third of their adult lives on their own. That means they had better get savvy about saving and budgeting, and do it quick.

Saving sounds simple. Spend less than you make, then put the rest away in smart investments. But like the standard advice about dieting (eat less and exercise more), simple advice is deceptively hard to follow. The first step to saving is budgeting.

To diet, before you can cut back, you have to know what you eat. And to begin budgeting, first you must analyze where your money goes. Use Quicken or another financial management computer program if you like, or make the calculations by hand.

To do your own calculations, make columns on paper and list at the top of each column the budget categories that apply to you. Your budget categories might include:

  • Mortgage
  • Rent
  • Food
  • Utilities
  • Gasoline
  • Insurance
  • Credit card payments
  • Installment loans
  • Repairs
  • Clothing
  • Medical
  • Personal and beauty care
  • Books and magazines
  • Entertainment
  • Gifts
  • Charity
  • Hobby expenses
  • Taxes
  • Miscellaneous
  • Savings and investments

To this list add budget categories that are uniquely yours.

Then go through your checkbook for the past year and list each check in its proper column. Add each column, and you will have a summary of your spending by category for the past year.

If you have kept your credit card bills, put each credit card charge into a category, instead of lumping your entire payments under "credit card payments." Although this may, at first glance, seem like a demanding task, you will be surprised to find that most of your charges fall into just a few major categories, such as dining out, clothing, and so on, and so the monthly bill can be categorized easily.

Decide where to cut back and which categories you expect will increase. Divide the revised amounts by twelve to arrive at your preliminary monthly budget.

Adjust and readjust the figures until your monthly budget equals your monthly income. This may take some doing, but persevere. Be sure you allocate as much as possible to the category "savings and investments."

If your income doesn’t cover your expenses, a budget will force you to make some hard choices. When you make a budget, you will have to decide what is most important to you and what you can live without. A budget won’t give you more money each month, but sticking to it will leave you with more at the end of the month.

Each month, tally your checkbook and credit card expenses for each category, just as you did here for the year. Then prepare a four-column worksheet that lists your budget categories in the first column, your budgeted expenses in the second column, and your actual expenses in the third column. In the fourth column compute whether you exceeded your budget or came in under, with an explanation.

If you consistently exceed your budget, you must adjust your spending habits or find a way to increase your income so you can accommodate your extra spending.

If full-blown budgeting sounds like too much trouble, you may want to use a shortcut method to control your expenses. Because some expenses, such as your mortgage payment, your car payment, most utilities, and even most groceries, are beyond your control, the shortcut method doesn’t focus on them.

Budget only a few categories – the ones you can control – and analyze your spending each month for those categories only. Though this method is simpler, be sure you periodically review all your monthly expenditures to ensure that your total spending doesn’t exceed your income.

You’ll find more ways to boost your income and cut expenses at the WIFE.org bookstore.

This Article Prince Charming Doesn't Live Here Anymore was written by Ginita Wall, CPA, CFP