Budget Recon

Ready to create a budget? Great! First, know where you stand by tallying up all the funds coming in (whoo hoo!) and all the spending going out (wah wahhhh). We promise it’ll all be worth it in the end.

Big money coming in

What do you really have to work with? Think through this list to tally up all of the funds that come into your household:

• Your paycheck (hint: find your gross pay on your Leave and Earnings Statement, or LES).
• Your spouse’s paycheck.
• Rental income.
• Interest and dividends from savings or investments.
• Grants or other stipends (not loans, of course).
• Other outside wages.

When it comes to pay, it’s not nothing but net

You know your net pay — the amount you actually take home in your paycheck. But when you document your pay for budgeting purposes, put in your gross — the amount you make before taxes or other deductions are taken out. Then, note down each deduction so you can take charge of them.

Why go for “gross” … ?

Look at your gross pay to understand the impact of various deductions. You can take some degree of control over income tax withholding, benefit expenses and retirement savings to meet your individual goals:

• Case 1: You got a big tax refund last year. This year, you lower your withholdings — and you get more to take home in each paycheck. You get to use the money wisely now instead of being tempted to blow the big refund on something that might not be seem so smart later.
• Case 2: Your want to save for retirement. You up TSP contributions and have your spouse contribute to his or her employer-provided retirement plan. You get less take-home pay, but progress towards your goal is underway!

Big spender?

Think you’ve got a handle on the funds coming in? Then it’s time to look at spending going out. Scan your checking account activity or online statements to make an inventory of typical expenses. If you tend to use cash, write your spending down or track receipts for at least a month.

Typical Expenses

It can help to have a checklist of common expense categories to work through–click on the Budget Worksheet in the right sidebar. These are the biggies:

Household

• Rent / Mortgage Payment
• Property Taxes (record 1/12 of annual expense)
• Utilities, cable, satellite, internet, etc.
• Home maintenance
• Furniture / Decor
• Food
• Phone / Mobile Phones
• Property insurance (renters, homeowners)

Insurance

• Health
• Life (SGLI, spouse’s group plan, personally owned, etc.)
• Long-term care
• Disability

Transportation

• Vehicle Payment
• Gas / Parking / Tolls / Public Transport
• Vehicle Maintenance
• Registration / License Fees (record 1/12th annual expense)
• Auto insurance

Personal

• Clothing
• Laundry / Dry Cleaning
• Grooming / Toiletries
• Child Care (baby sitters, child care center, etc.)

Recreation/Entertainment

• Vacation (record 1/12 annual expense)
• Entertainment / Dining Out
• Hobbies (ex. golf or tennis equipment and fees)
• Club Fees / Organizational Dues

Education

• Tuition
• Room / Board / Travel
• Books / Supplies / Uniforms

Seasonal and Charitable Giving

• Gifts
• Place of Worship Donations
• Other Donations

Don’t forget your debts

If you have some debt, don’t forget that these are expenses you need to factor into your budget.

• Credit Cards
• Loans (other than mortgage or vehicle loans)

Don’t forget deductions

Some expenses get you before you even take your paycheck home. Noting each one separately in your budget will help you take control where you can.

• Federal Income Tax Withholding — Most income tax refunds happen because you gave the government too much money throughout the year. When your tax bill turns out to be less than you sent, they give you back the extra – without interest! So the best bet is to get as little refund as possible. Adjust your withholdings as needed to maximize your take home pay.
• State Income Tax Withholding — Ditto.
• Social Security (FICA) — Not in your control.
• Medicare (FICA) — Ditto.
• Other deductions — You might be deducting retirement savings or have allotments set up, which you can adjust depending on your goals.

Factor in your savings

Be sure to track money you’re saving each month, if any. We’re talking money that gets put aside and stays there — not funds that wind up getting used for normal expenses during the month.

If you aren’t saving now, that is a great reason to get a handle on your budget. A rule of thumb would be to save a minimum of 10% to 15% of your total monthly gross income.

• Emergency Fund
• Retirement Accounts (ex. IRA, Roth IRA)
• Other Savings or Investments

Simple subtraction

Whew! Once you’ve done the hard work of tallying all of your income and expenses, the question is this: Is money left at the end of the month or month left at the end of the money?

Subtract your total monthly expenses from your total monthly income and find out. Whatever you learn, knowledge is power. Then, you can begin to take control.