Calculating Your Financial Obligations: Debts and Living Expenses
In this section, you look at the debt and living expenses that you must pay (or, in some cases, choose to pay) each year.
These range from your monthly rent or mortgage payment to a car payment or lease, utility bills (including your cell), food, entertainment, contributions to charities, gifts (holidays, weddings, birthdays), alimony payments, credit card payments, and store charge-card payments.
Don't try to be “good” when listing your current expenses. Base your list on what you've done in the past, not what you'd like to do in the future. If you've spent $150 each of the last five years at the January white sale, you may not be able to break that habit cold turkey.
Writing Down Full Debt Amounts
In WORKSHEET 3-2, indicate the total amount you owe on credit cards and store charge cards, don't write only the minimum payments. Here's why:
Suppose you owe $5,000 to a credit card company, but rather than saying that you owe them $5,000 this month, your bill says that you have to make a payment of $65. That's your monthly payment, right? Wrong.
Remember that “obligations” refer to any money you owe anyone. You may think your Grandma has forgotten all about that $5,000 she loaned you to buy a car, but write it down anyway. Grandma may have a better memory than you think!
Credit card and store charge-card companies are in the business of making money, and one way is by having you pay a high rate of interest on your debt for as long as possible.
Did you know that if you make the minimum monthly payment, you might be paying on that $5,000 for 10 or 15 years? And that's without charging even one more item to your account in all that time!
Paying the minimum is never going to help you get your financial situation under control. (Find ways to pay off this debt much more quickly.)
Gathering Information
In order to fill out WORKSHEET 3-2, you'll have to gather some information. You probably know how much your rent or mortgage payment is off the top of your head, but you may not know exactly how much your utility bills have been. To find that information, look back through your checkbook or receipts. If you can't come up with the amount, give your utility company a call. If you ask, they'll probably send you free copies of your bills for the last year.
Averaging Out Utility Payments
It's important to look at all of your utility payments — not just the one for last month — because some of them might change from month to month. For example, your electric bill may get much higher in the summer if you live in an area where air conditioning is critical to your comfort. Likewise, your gas bill may rise sharply in the winter if you live in an area that has low temperatures at that time of year. on the other hand, your water, cable, sewer, phone, and other utilities may not change at all.
To figure out how much your average electric bill is, add up your last 12 monthly payments to the electric company and divide by 12. This will give you the average amount that you pay each month.
Remembering Periodic Expenses
Remember to consider the expenses that people tend to forget because they come due only every six or 12 months:
Auto insurance
Vehicle excise tax (if your state has one)
Car repair and maintenance
Homeowner's or renter's insurance
Property taxes
House repair and maintenance
Gifts (holiday, birthday, wedding)
Events to attend (such as weddings)
Vacations
If, as part of your monthly mortgage payment, you pay one-sixth or one twelfth of your homeowner's insurance and property taxes, which are then stored in an escrow account until they are due, write down your total monthly mortgage payment but do not include an amount on the lines that ask for your homeowner's insurance and property taxes.
Unlike the income worksheet, for this worksheet, do try to anticipate any expense that may come up in the next 12 months, for you and your family. If your best friend who lives 2,000 miles away is probably going to get married, calculate the cost of that trip, the clothes you'll need, the gift you'll buy, and so on.
If you'd find it easier to figure these expenses month by month, see this section for 12 monthly worksheets for determining exactly when and how you spend your money.
Weekly Obligations |
Amount |
Multiply by |
Annual Amount |
Goceries and household items |
$ |
52 |
$ |
Day care |
$ |
52 |
$ |
Contributions to church or other |
$ |
52 |
$ |
Weekly rent on furniture or appliances |
$ |
52 |
$ |
Entertainment/babysitting |
$ |
52 |
$ |
Eating out, including coffee and lunch |
$ |
52 |
$ |
Monthly Obligations |
Amount |
Multiply by |
Annual Amount |
Rent or mortgage |
$ |
12 |
$ |
Car payment or lease |
$ |
12 |
$ |
Electric bill (average) |
$ |
12 |
$ |
Gas bill (average) |
$ |
12 |
$ |
Water bill |
$ |
12 |
$ |
Sewer bill |
$ |
12 |
$ |
Trash-pickup bill |
$ |
12 |
$ |
Cable/DSL/satellite bill |
$ |
12 |
$ |
Telephone bill |
$ |
12 |
$ |
Cell-phone bill |
$ |
12 |
$ |
Bank charges (debit card, fees, etc.) |
$ |
12 |
$ |
Haircuts/manicures/pedicures |
$ |
12 |
$ |
Home equity loan |
$ |
12 |
$ |
Other loan |
$ |
12 |
$ |
Credit card or store-charge bill (total due) |
$ |
12 |
$ |
Child support or alimony payment |
$ |
12 |
$ |
Quarterly Expenses |
Amount |
Multiply by |
Annual Amount |
Car maintenance |
$ |
4 |
$ |
House maintenance |
$ |
4 |
$ |
Semiannual Expenses |
Amount |
Multiply by |
Annual Amount |
Auto insurance |
$ |
2 |
$ |
Property taxes |
$ |
2 |
$ |
Wedding gifts |
$ |
2 |
$ |
Events to attend |
$ |
2 |
$ |
Clothing and shoes |
$ |
2 |
$ |
Annual Expenses |
Amount |
Multiply by |
Annual Amount |
Homeowner's or renter's insurance |
$ |
1 |
$ |
Vehicle registration and excise tax |
$ |
1 |
$ |
Car repair |
$ |
1 |
$ |
House repair and maintenance |
$ |
1 |
$ |
Holiday gifts |
$ |
1 |
$ |
Birthday gifts |
$ |
1 |
$ |
Vacation |
$ |
1 |
$ |
Club memberships |
$ |
1 |
$ |
Other Expenses |
Amount |
Multiply by |
Annual Amount |
$ |
$ |
||
$ |
$ |
||
$ |
$ |
||
$ |
$ |
||
$ |
$ |
||
TOTAL: |
$ |
$ |
