newsletter - THIRD quarter 2010
This quarter's topic is BUDGETs. Budgets are useful tools
that help you track & plan your spending and control money
flows. A budget can also facilitate decision-making when
properly constructed. That's also the problem with budgets -
all too often they are not properly constructed. A budget
that is too loose and forgiving is useless and one that is
too tight and merciless induces irrational spending just a
get a bit of personal freedom back into one's life.
To make a budget, first write down absolutely every penny spent on what, when, where, and why. Do this for three months. Also note down every penny earned or received. Include everything with enough detail so you can later categorize it.
Income Categories: Earned, Unearned, Gift, Pension. Note from whence the money came as in which employer, investment, or retirement account and whether that bit of income is taxable or not. Also note when you receive the income: every pay period, monthly, annually and if the amount varies as it might if from an annuity.
Spending Categories: Nice & Necessary (food & savings for example); Not Nice & Necessary (insurance, housing & utiltities); Not Nice & Unnecessary (your bad habits); Nice & Unnecessary (payments on the Ferrari). The idea is to reduce all spending but to begin with those that are Unnecessary, although I will admit a Ferrari is very nice. But you should NOT eliminate ALL Unnecessary spending as that would make your budget unmerciful. Everyone needs some 'walk around' money for which they do not have to account. "A little of what you fancy does you good." - just make sure that it is JUST a little.
Match income with Necessary expenditures. Mortgages are normally taken from the first paycheck of the month since most mortgages are due by the 15th of the month. Plan when you will meet each obligation from which bit of income. But do NOT spend every penny of each bit of income - always leave something in the till.
Everyone gets an allowance. But this allowance must be money you can afford to throw out the window. If you cannot afford to do that then you have set the allowance amount too high.
Once you have formulated your budget, leave it alone for three to six months. Never be in a hurry to change your budget. Should your budget require changes, you have to go through the entire process again, this time correcting errors and misconceptions.
We are happy to help you at every and any stage of the budget development process.
To make a budget, first write down absolutely every penny spent on what, when, where, and why. Do this for three months. Also note down every penny earned or received. Include everything with enough detail so you can later categorize it.
Income Categories: Earned, Unearned, Gift, Pension. Note from whence the money came as in which employer, investment, or retirement account and whether that bit of income is taxable or not. Also note when you receive the income: every pay period, monthly, annually and if the amount varies as it might if from an annuity.
Spending Categories: Nice & Necessary (food & savings for example); Not Nice & Necessary (insurance, housing & utiltities); Not Nice & Unnecessary (your bad habits); Nice & Unnecessary (payments on the Ferrari). The idea is to reduce all spending but to begin with those that are Unnecessary, although I will admit a Ferrari is very nice. But you should NOT eliminate ALL Unnecessary spending as that would make your budget unmerciful. Everyone needs some 'walk around' money for which they do not have to account. "A little of what you fancy does you good." - just make sure that it is JUST a little.
Match income with Necessary expenditures. Mortgages are normally taken from the first paycheck of the month since most mortgages are due by the 15th of the month. Plan when you will meet each obligation from which bit of income. But do NOT spend every penny of each bit of income - always leave something in the till.
Everyone gets an allowance. But this allowance must be money you can afford to throw out the window. If you cannot afford to do that then you have set the allowance amount too high.
Once you have formulated your budget, leave it alone for three to six months. Never be in a hurry to change your budget. Should your budget require changes, you have to go through the entire process again, this time correcting errors and misconceptions.
We are happy to help you at every and any stage of the budget development process.
On a Lighter Note
The polo season has begun! Should any clients want to spend some time Saturday evening relaxing in the countryside, for free (with a picnic, of course) please give the office a call. We'd be happy to see you. Everyone is very welcome and dress is casual. Great Meadows Field Event Center, Saturdays, 7 to 11pm.
