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easoning &
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© 2014 Pacific Crest
YOUR
TURN!
Scenario:
A newly married couple, one of whom is finishing up a Master’s degree.
No financial aid is currently received and loan payments of 5% of monthly
income are made for a previous school loan. This young couple have no
children and live a very green lifestyle, walking, bicycling, or taking the bus.
They own no car and pay 2% of monthly income for bus fare. They are saving
for a child and their own home, splitting 30% of current income across two
different savings accounts. Both work and the combined income is $39,700
yearly. One partner receives an additional $1,000 monthly from a trust fund,
$100 of which is sent to help a niece who is in college. They travel often and
calculated that their entertainment/travel budget is 20% of their income. Their
other expenses are food (3% for dining out, 7% for eating at home), housing
(20%), health care (4%), emergency fund (5%) with the remaining 4% going
to personal expenses.
Use the Budget Worksheet that is available on the companion website.
O
ops
! A
voiding
C
ommon
E
rrors
●
Not including enough categories in the budget to account for all expenses
Example
: Frank’s family finds each month that they have spent more than their income. They
made a budget at the start of the year and so they don’t understand what the problem
is.
Why?
Most likely they did not include all the appropriate categories or they are overspending
in one or more categories. They need to study credit card statements and their
checkbook to see what expenses have occurred that were not provided for in the
budget and make adjustments to the budget accordingly.
●
No money for savings
Example
: Julie’s family wants to save for a vacation but have no money left at the end of the
month to put into savings.
Why?
Julie’s family did not put a “Savings” item in their budget, but planned instead to just
save what they had left at the end of the month. Unless savings is funded first, along
with other necessary expenses, it is likely that there will be no money left to put into
savings. Budget Worksheet #1 ends with the statement, “Maybe your income is more
than your expenses. You have money left to save or spend.” Saving the “leftovers” is
NOT the way to wealth.
A
re You Ready?
Before continuing, you should be able to ...
I can...
OR
Here’s my question...
find a budget worksheet online that is a
good fit to start on my family budget
find my family’s expenses for the last
several months