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Couchman, Glennis M.

Goss, Dorothy

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T-4225 Dollar Watch: Developing and Managing a Spending Plan OKLAHOMA COOPERATIVE EXTENSION SERVICE Glennis M. Couchman, Ph.D. Family and Consumer Economics Specialist Dorothy Goss, Ph.D. Family Resource Management Specialist Where does all the money go? House payment or rent? Food? Utility bills? Clothes? Video rental? Money may just seem to disappear from your wallet. Knowing how much you spend and what you spend money on is the first step towards matching expenses with income. A spending plan can give you more control offamily living expenses. It can help you decide: Where are you financially? How do you get where you want to be? A spending plan needs to fit your situation and desires. It should be flexible enough to allow for changes. By working together, family members can develop a plan to improve their financial well-being. Set Financial Goals Setting financial goals is a way to plan your family's financial security. Together, decide what is important to your family now and two to three years from now. Then, decide what is important five to ten years from now, such as down payment on a house or education for children. Estimate the amount you need to start saving to achieve these future goals. It may not be possible to achieve the goals of all family members at the same time. You may need to stagger the times of goal accomplishment. It may be necessary for the family members to discuss and compromise about what goals are the most important. Needs vs. Wants There are certain expenses we all have to pay (food, rent or house payment, and utilities). Needs are those expenses essential to a family's livelihood. But what do Family and Consumer Sciences you wish you could spend your money on? These are things we think we cannot live without ... the second television, new clothes, and a vacation. These "wants" can become goals. However, people rarely get all the things they want. Therefore, a family should decide what "wants" are priority items. Determine Your Income When planning how to spend your income, deter-mine the total of all income for your family from various sources. Start with take-home pay, commissions, inter-est from savings, child support payments, and income from rental property. Although you may receive income weekly, every other week, monthly, or quarterly, or a yearly bonus, enter the amount and source in the month you expect to receive the income. If some of your income varies, such as commissions, or is unreliable, such as child support payment, list estimates of this income separately. Then as you plan, you will know this cannot be counted on to pay for basic family expenses. Tracking Your Spending When planning future spending, you will need to know how you are currently spending your money. This will help you identify patterns of spending commit-ments. The way you will know where the money goes is to write down how it is being spent on a daily basis. Total the daily spending for a monthly sum. Enter this monthly sum on the Family Living Expense Record. Keep track of the amount actually spent for all house-hold items. This includes food, video rental, meals, snacks, money given to children, etc. Carefully look at how the family money was spent. Then, as a family, decide how to change the family's spending. (continued on back page) ------------ Oklahoma State University------------Guidelines for Developing a Spending Plan 1. List all family income by month in the "Money Available" line. Include take-home pay from a job, commissions, child support payments, interest, bonus, etc. 2. Identify money committed to family expenses. Some expenses are specific amounts paid on specific dates, such as rent or mortgage payments, install-ment loans, insurance payments, etc. Write the due date of these bills in the "Due Date of Expenses" column. Enter the estimated monthly amount in the "Plan" column for each month of the year. 3. Estimate the amount needed to be saved monthly for emergencies and goals the family wants to achieve. Record the monthly planned savings in the "Plan" column on the "Savings" line under "Expenses" for each month of the year. 4. Estimate monthly amounts for expenses that can vary from month to month, such as food, gasoline, recreation, and electricity. Past expenditure records can assist in making these estimates. Write these amounts in the appropriate "Plan" columns. 5. Account for all expected expenses in steps 2, 3, and 4. Revise and adjust the "Plan" figures each month as the family's needs and wishes change. 6. Each month, record actual expenses in the "Spent" column. Check to see if "Spent" figures are close to "Plan" expenditures. If some categories need more money, look for ways to adjust in other categories. Determine if there are ways to reduce spending. Sometimes changes in the family lifestyle will be necessary to gain control of living expenses. 2 -------------- Oklahoma Cooperative Extension Service • Oklahoma State University Family Living E: Due Date JAN FEB MAR APR of Expenses Money Available xxxxxxxxxx Expenses xxxxxxxxxx Plan Spent Plan Spent Plan Spent Plan Spent Pic Savings House Rent/Mortgage Home Maintenance Furnishings/Equipment Electricity Heat/Gas Water, Sewage, Garbage Telephone Credit Card/Personal Loan Food (Groceries) Meals Away from Home General Household Supplies Auto Car/Pickup Payments Tags, License, Taxes Gas/Oil Auto Maintenance Doctor, Dentist, Eye Care Medications Property Taxes Insurance Home Auto Health Life Educ./Self-lmprovement, Newspapers, Books School Expenses Children's Lessons, etc. Clothing and Personal Care Recreation/Hobbies Cable TV & Videos Vacation Personal Allowance Membership Dues Child Care/Household Help Pet Care Gifts Contributions Other Total Expenses ------------------------------------------- 3 Kpenses Record MAY JUN JUL AUG SEP OCT NOV DEC .n Spent Plan Spent Plan Spent Plan Spent Plan Spent Plan Spent Plan Spent Plan Spent Oklahoma Cooperative Extension Service • Oklahoma State University ------------------- 4 5 Dollar Watch: You and Your Family Develop a Spending Plan ------------ Oklahoma Cooperative Extension Service • Oklahoma State University (continued from front page) Planning for Infrequent Expenses Some bills you pay only once or twice a year, such as car tags and car insurance. You may need to save monthly to be able to pay these bills when they become due. Estimate the total amount needed for these ex-penses and how much you need to save each month to cover them. One way to manage this is to establish a special savings account for these expenses. When it is time to pay these expenses, the money can be taken from this account. Another way of managing infrequent expenses is spreading such expenses across the year. For example, you could work with insurance agents to stagger the months when premiums are due. Another option is to use "budget plans" such as those offered by utility compa-nies. These plans let you pay an estimated average bill each month with an adjustment month at the end of the budget plan year. Plan for Savings Make savings for emergency expenses and family goals part of the spending plan. Once you decide the specific amount you want to save each month, list savings along with food, rent or house payment, utilities, and other expenses. References: Fitzsimmons, V.S. (1989). Money in marriage. Advanc-ing Consumer Interest, 1 (2), 12-15. Garmen, E.T. and Forgue, R.E. (1997). Personal Fi-nance. 5th edition. Boston: Houghton Mifflin Co. Rettig, K.D. (1993). Problem-solving and decision-making as central processes of family life: An eco-logical framework for family relations and family resource management. Marriage and Family Re-view, 18 (3/4), 187-222. Slusher, B.J. (1990). Are financial management pro-grams helping families? Advancing Consumer In-terest, 2(2), 13-18. Oklahoma State University, in compliance with Title VI and VII of the Civil Rights Act of 1964. Executive Order 11246 as amended, Title IX of the Education Amendments of 1972, Americans with Disabilities Act of 1990, and other federal laws and regulations, does not discriminate on the basis of race, color, national origin, sex, age, religion, disability, or status as a veteran in any of its policies, practices or procedures. This includes but is not limited to admissions, employment, financial aid, and educational services. Issued in furtherance of Cooperative Extension work, acts of May 8 and June 30, 1914, in cooperation with the U.S. Department of Agriculture, Samuel E. Curl, Director of Oklahoma Cooperat1ve Extension Service, Oklahoma State University, Stillwater, Oklahoma. This publication is printed and issued by Oklahoma State University as authorized by the Dean of the Division of Agricultural \ Sciences and Natural Resources and has been prepared and distributed at a cost of $845.33 for 2,000 copies. #8451 0900 PNL Revised. 

Dollar watch: Developing and managing a spending plan

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Dollar watch: Developing and managing a spending plan

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