411 Session - Balancing your Budget

Welcome to the 411 session on how to balance your budget. With couple of simple steps you can take full control of your finances.

• Let's start with a few basic questions:

• Do I know exactly how much money I have right now?
• What are my upcoming bills?
• What are my monthly fixed expenses?
• Which costs vary?
• How much cash do I have in the bank?
• How much outstanding credit do I have?
• Do I have enough money to pay bills that are not monthly?
• Am I saving for a rainy day?
• Do I know my credit score?
  • Ok, maybe those questions were not that basic. Let's take this step by step.

• Step 1: Expenses
  • List your fixed expenses.
  • List your variable expenses.
  • List your discretionay expenses (the "extras", e.g. movies, eating out, clothes, toys, etc.)

• Step 2: Income
  • List your fixed income. What amounts can you rely on every month? (Wages, Financial Aid, etc.)
  • Do you have any variable income?

• Step 3: Finding you beginning balance
  • Subtract you expenses from you income.
  • What remains is your beginning balance.

Now that we have a beginning balance we have to start building good financial habits.

• Balancing your budget is an ongoing thing. You should do it at least 2x a month.
• Find your system for ensuring that you remember all your expenses.
  • Simple transaction register
  • Start a budget binder.
  • Collect receipts.
  • Make note of when bills are due.
  • Make sure you have access to all your financial information. (Bank, Credit Cards, etc.) A useful tool is Mint Bills.
  • Keep an eye on your credit rating. Try Credit Karma.
• Please not that there is a difference between outstanding amounts and completed amounts. The first are things that you will pay at a later date (e.g. credit card bills), the second are things like cash you took out of the ATM, check payments and debit card payments. The checkmark row on the transaction register will help you keep track of what is done and what is still in limbo.
• As you keep a steady budget you may start to notice a difference between your bank account and the amount in your register. This is because credit card purchases are not deducted from your account until the bill is actually due (often this can be a matter of several weeks from the time of purchase). The amount in your register is what you actually have available to spend! Keep aware of your monthly expenses and outstanding credit card bills.
• Make sure to check if your budget actually balances by adding all the open items back to the final amount in your check register. If the end result matches the amount in your bank account then your budget is balanced.

A few things to remember:

• The Golden Rule: Don't spend what you don't have!
• Make sure you understand that even if your account balance says $500.00, it may not mean you have that to spend. Keep aware of your monthly expenses and outstanding credit card bills.
• Having a credit card with a credit line does not mean that you have actual spendable money at your disposal.
• Take advantage of rewards if you can.
• Educate yourself on financial issues. Check out this website for some helpful ideas: Hands On Banking.