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© 2014 Pacific Crest
385
Step
Explanation
2.
Determine items that are
missing or superfluous
No budget form will be an exact fit for your family or organizational
needs
Under “Income” add a line for interest/dividends (from savings and investments). Also
financial aid should be included as a line item here because it is income.
Because no one pays child support, that item can be eliminated.
They never uses taxis or public transportation, so that line can be eliminated as well.
Interest on credit cards is different from credit card fees, so should be listed separately.
Because of its importance, savings should be a separate category, not part of “other”
under financial.
In the case of this family, the Savings category should be split up into “Emergency
Fund,” “Roth IRA,” “College Savings Fund,” and “Vacation Fund.”
3.
Assign percentages to
each category
You might start with the typical percentages as available in the
Resources on the companion website and adjust to reflect the
family’s priorities or practices.
Housing
25%
Food
15%
Utilities
10%
Transportation
10%
Savings/Insurance
10%
Health care
8%
Entertainment/Recreation
7%
Debt Payment
5%
Charity
5%
Miscellaneous/Personal
5%
4.
Calculate actual dollar
amounts
Multiply the percent in each category by the total income
This can easily be done
once a specific income is
known.
In this case,
$4,200 + $360 + $85 per
month: $4,645.
Thus the amounts at right:
Housing
$ 1161.25
Food
$ 696.75
Utilities
$ 464.50
Transportation
$ 464.50
Savings/Insurance
$ 464.50
Health care
$ 371.60
Entertainment/Recreation
$ 325.15
Debt Payment
$ 232.25
Charity
$ 232.25
Miscellaneous/Personal
$ 232.25
5.
Validate
Make sure that percentages add to 100% and that expenses do not
exceed income. (True validation of a budget takes at least a year.)
Total of percentages is 100%.
By calculating these percents of income, the total of expenses will equal income,
unless, of course, one spends more than budgeted.
8.4 Budgeting