PERSONAL BUDGETING

YOUR FINANCIAL ROADMAP FOR SAVING MONEY

THE BENEFITS OF BUDGETING

Financial health is dependent upon striking a smart balance between what you earn, what you spend and what you save. A carefully maintained personal budget can help you achieve that balance. A business owner would never consider running a business without a clear understanding of income and expenditures. It's important to treat your own finances with the same degree of care.

In time, you'll soon see that a detailed budget can help you:

Put your day-to-day finances into balance.
Develop good spending and saving habits.
Prepare for shortages in income or emergency expenditures.
Put your longer-term financial goals into perspective.

This Guide can show you how to develop a budget and better money habits.

THE FOUR STEPS TO A BALANCED BUDGET
STEP ONE: IDENTIFY CURRENT MONTHLY AND ANNUAL INCOME AND EXPENSES

Using the last year as your starting point, itemize your income and expenditures. Use your bank and credit card statements, tax return, investment account statements and receipt files.

Income
Include the following:

Salary/wages before taxes
Income from self-employment
Retirement pay and/or government-source income (e.g. Social Security, disability, unemployment, annuity and private pension payments)
Interest and dividends
Alimony and/or child support
Rents and/or royalties
Income from trusts

Fixed Expenses
These can include:

Taxes including income, property and national insurance
Mortgage or rent
Insurance including medical, auto, homeowners, life and other insurance expenses
Phone and utilities
Automobiles (costs of operating minus insurance cost)

Variable Expenses
These can include:

Food
Clothing
Home maintenance and repairs
Furniture and appliances
Entertainment

Reality Check
Subtract the total yearly amount of all of your expenses from your income figure. If this amount is what you have put away in savings for the previous year, then you have a good idea whether you've included all of your variable expenses. If there is a large gap, a little digging will help you reveal where you spent the extra money.

STEP TWO: SET YOUR BUDGET GOALS

Once you have a clear picture of your current finances, you may need to consider other resources to achieve your goals. You may want to save for the deposit on a home, reduce credit card or mortgage debt or contribute to your retirement.

STEP THREE: CREATE YOUR BUDGET

The next step is to create your budget. You can do it by hand or use a computer program designed to help.

Construct a table with five columns:

ITEMS will contain each of the items you listed under fixed and variable expenses.
LAST YEAR'S ACTUAL will contain the monthly amounts you came up with for each fixed and variable expense.
THIS YEAR'S BUDGETED is what you will allow yourself to spend on that item for the month. (It can, and probably will, differ from last year's actual expense).
THIS YEAR'S ACTUAL is what you spend on that item for the month.
OVER/UNDER BUDGET is where you will write in how much more or less you spent during that month that you had budgeted.

By now you should have a good idea of how much you need to put aside. To save more than you have in the past, you'll need to cut down on optional expenditures. To do this, enter an amount under "budgeted amount" that is less than "last year's actual."

STEP FOUR: MONITOR HOW YOU ARE DOING

At the end of each month and year, look at your monthly totals and determine whether you've over or under spent your budgeted amounts. Performing a monthly and yearly review will help you adjust your goals for next year.

Once you've taken a look at your expenditure profile over time, consider these savings ideas:

USING YOUR BUDGET TO HELP SAVE MONEY

With personal budget in place, you will have a better picture of where your money goes and where you might cut back if the need arises. An accurate budget often leads to big surprises about where your money is going.

This could include:

Cafeteria and restaurant meals
Long distance phone charges
Clothing and footwear
Monthly subscriptions (newspapers, magazines, television services, computer services, clubs)
Entertainment
Discretionary expenses including snacks, impulse purchases.

Once you've taken a look at your expenditure profile over time, consider these savings ideas:

Save your income
Use an automatic savings plan to make sure that you save a percentage of your paycheck every payroll period. Even investing as much as $100 a month in a mutual fund could turn into as much as $20,000 in ten years with compound interest and a favorable interest rate.

Reduce your debt
Consider replacing your higher purchase debt with a loan from a Credit Union with a lower rate than a credit card.

Lower your credit card costs
In addition to cutting your overall use, there are many ways to cut your credit card costs, e.g., switching to a card with lower interest or lower fees. Credit cards are not a good way to borrow - the interest rates are likely much higher than other credit options.

HOW YOUR SAGICOR PRODUCER CAN HELP

Your Sagicor Producer can provide sound advice to help guide your decisions. Your Producer will begin with a fact-finding exercise to help you identify the major incomes and expenses in your household. Call 1-888-SAGICOR now to get started.