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Feel free to use this tip sheet / checklist as you tackle your own ""do-it-yourself"" organizing projects. If you would like to REPRINT or DISTRIBUTE this information, please click here for reprinting instructions.
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AN IDEA OF YOUR FINANCIAL GOALS
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- know what you hope to accomplish before beginning your budget
- pay off debts? reduce your expenses? save for retirement?
- list your financial goals for 6 months, 1 year, 5 years, 10+ years
- don't worry about feasibility -- where there's a will, there's a way
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CREATE THE SHEET
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- start with a sheet of legal paper (or spreadsheet program)
- create 12 columns, one for each month of the year
- label each row for a different living expense
- think in terms of categories that you can divide in to subcategories
- ex: "automobile" includes gas, repairs, insurance, registration, etc.
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EXPENSE TRACKING
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- create a list of static expenses (cost the same every month)
- rent, mortgage, car lease, student loan, etc.
- then evaluate variable expenses (fluctuate every month)
- groceries, utilities, entertainment, clothing, etc.
- go through last year's bills to find large and unexpected bills
- car repairs, medical bills, fines, etc.
- tally each irregular expense and divide the total by 12
- gives a clearer idea of how your costs spread over a year's time
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FINDING THE MONEY LEAKS
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- avoid impulsive spending (proactive rather than reactive behaviors)
- make conscious decisions about how to invest your resources
- clear up financial disorganization (interest charges, late fees, etc.)
- pay attention to how and where we spend money
- track every single penny you spend for a month
- look at each expense and ask if you get a tangible benefit from it
- ask if it is worth the time spent earning the money to pay for it
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HANDLING YOUR DEBTS
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- list out all of the balances you owe
- make note of the interest rate charged by each
- pay the minimum on all debts except the highest interest rate
- pay as much as you can on the highest interest rate
- when that card is paid, apply money to the next-highest rate
- keep working your way down the ladder until all are paid off
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TALLY UP YOUR INCOME
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- you can't create a budget until you know what you earn
- calculate your income after taxes and Social Security
- after other withholding (health insurance, 401K, etc.)
- include only regular sources of income
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WHAT IS THE VERDICT?
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- compare income to expenses to see where you stand
- if you are in the black, you can begin committing some to savings
- no matter how large or small an amount, savings is a priority
- build your savings and investments into your budget like a bill
- pay yourself first before paying anyone else
- at least 10% of your income going into savings
- if you are in the red, your goal is reducing your spending
- decide which expenses are necessary and which waste money
- start first with incidental expenses (sodas, snacks, magazines)
- also consider larger expenses (housing, car, vacations)
- <30% of income each for housing, household, and other bills
- ask if your money isn't better spent elsewhere
- ask if you would get more benefit from other spending patterns
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