Creating a Workable Budget

One of the first things you need to gain control over your own finances is an honest assessment of your current financial flows. Every single mother needs to know how much money is coming in, how much money is going out, and how much she owes to credit cards, banks, or other creditors. You cannot build a financial future without a clear picture of what you owe, what you earn, and where your money is going.

A budget worksheet is a great way to organize your finances to make sure you're not spending more than you have can afford and to keep yourself on target to reach your financial goals. While it is almost impossible to hit your budget figures exactly during the first few months, use your shortcomings as the road map for crafting a truly refined, workable budget.

Basically, to create a workable budget, you need to assemble the following information:

  • After-tax income: This is the amount you receive in a check after your employer withholds income taxes. To raise your standard of living, find a way to raise your income.

  • Savings: Paying yourself first every month means building a financial cushion and a lucrative future. The more you can increase your savings, the better.

  • Required expenses: These are your unavoidable, necessary costs. Trim where you can, and if you are living beyond your means, lower your expectations and your spending budget.

  • Expendable expenses: These are the things you may enjoy but that you don't need to live, such as alcohol, jewelry, expensive groceries, fancy coffees, dining out, movie rentals, or cable television service. You can seriously pare down or eliminate these budget items.

Essential

Stay on top of your budget. If you have fallen short for two straight months, write down every cent you spend and track the source of excess. Sticking your head in the sand will only make the situation worse. Get the matter in hand and trim where necessary. You'll feel better and get back on top sooner.

It's important to figure out every conceivable expense that weighs down your true-life spending pattern. Use the following list as a guideline for creating the in-depth list of expenses you will need to create a thorough, realistic, functional budget:

  • Rent or mortgage

  • Personal and residential taxes

  • Medical insurance, dental insurance, glasses or contact lenses, medicine, co-pays

  • Car insurance, gas and car maintenance, parking expenses, tolls

  • Home or renter's insurance

  • Utilities (electricity, water, gas), Internet, cable, telephone, cell phone

  • Groceries, eating out, entertaining at home

  • Loans or credit card payments

  • Savings

  • Tuition or student loans

  • Grooming expenses (haircuts, cosmetics)

  • Clothing and clothing maintenance, shoes, coats

  • Entertainment (movies, concerts, book purchases, coffee, night out with the girls)

  • Special occasions (birthdays, weddings, Christmas)

  • Emergencies

  • Professional associations, conferences, classes

  • Gym or club memberships

  • Vacations, getaways

  • Veterinary bills

  • Children (school activities, tuition, child care, medicine, lessons)

If you've made your budget and you can't figure out how you will be able to save money given your current income and circumstances, first consider reducing some of your expendable expenses, and then reduce required expenses until you can bolster your income. If you can raise your income and still keep your budget costs level, you can plow the overflow into savings or investments. Whatever you do, avoid spending more than you earn.

Here's a sample budget reflecting narrow margins and a budget that restrains spending:

Sample Budget for One Month

Income

Salaries, wages, tips, etc., as well as interest on checking account, after taxes

$3,000

Savings

Savings to build two- to five-month emergency cash balance

$50

Savings for down payment

$100

Savings for retirement

$150

Savings for children's education

$10

Savings for vacations

$50

Savings subtotal

$360

Required expenses

Mortgage or rent payment, including homeowner's or renter's insurance

$850

Utilities — electric, garbage, water, heat

$80

Food, excluding fancy nights out and alcohol

$550

Medical and other insurance premiums

$30

Clothing, including cleaning

$100

Car payments, insurance, maintenance, public transit

$300

Telephone and Internet

$45

Credit card and other debt

$25

Child care

$100

Other required expenses

$250

Required expenses subtotal

$2,330

Expendable expenses

Food eaten out, alcohol, other non-required food expenses

$40

Movie rentals and theater visits, including snacks

$15

Vacation expenses

$40

Cable and nonessential Internet and telephone

$50

Gifts and donations

$10

Other expendable expenses

$50

Expendable expenses subtotal

$205

Subtract savings and all expenses from income; this is your budget buffer

$105

If you can manage it, it's very wise to save the amount of your budget buffer. If your buffer is negative, you need to cut expenses and/or increase your income.

Review your budget regularly and make adjustments to reflect changes. If your salary bumps up slightly, make sure you know exactly how much extra cash is actually coming in. Before you rush out to buy a fancier car, allocate a healthy portion to paying down your credit card debt or to upping your monthly savings.

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  2. Personal Finance for Single Mothers
  3. Becoming Financially Literate
  4. Creating a Workable Budget
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