Where Does Your Money Go?

Many people have no idea what happens to their money. It just
seems to “disappear.” Here’s how to out how where
yours goes:

  1. List the bills you pay every month.
  2. For one month, jot down everything you buy and the
    price—no matter how little it costs.
    At the end of the month, categorize the items you’ve listed:
    “Food,” “Transportation,” etc. Then break down each category;
    for example, “Food: School Lunches, Snacks, Restaurants.” Now
    you know where your money goes.
    The Urge to Splurge Advertising and peer pressure tempt
    us to buy things we don’t need. Which of the items you
    categorized above were things you needed, like gym shoes or
    an ink cartridge? Which ones were things you just wanted:
    take-out pizza or that CD you played only once? Those are
    impulse purchases. They don’t seem expensive when you buy
    them, but they can keep you from reaching larger goals like a
    vacation, a cool car, or college.
    Think Before You Buy Before you buy an item, ask
    yourself whether the item is worth the time you’ll have to work
    to pay for it. The better you get at saying “no” to unnecessary
    spending, the more money you’ll have for what’s important
    to you.
    Creative Budgeting
    Using the expenses you listed before, complete a chart like the
    one on the next page. Look at each expense in column 2 and
    think of ways to reduce it. Enter the lesser amount in column 3,
    your New Budget. Be sure to budget 10 to 30 percent of your
    income for “Savings.” (To see why, go to Saving and Investing
    Skill.) Total column 3 to see if your budget matches your
    income. If not, you’ll need to keep trimming expenses until it
    does or another source of income.
    Personal Finance Handbook
    Budgeting:
    Take control of your cash
    Did you really need that cashmere sweater or those $200 sneakers? How
    did you get $5,000 in debt? Getting control of what you spend—budgeting—is a
    skill you’ll need throughout your life.
    ETT_EM_R1_R33_FinHndbk.indd R4 2/2/10 9:56:53 AM
    Building Your Budget
    Part-time Job: $______
    Monthly allowance: $______
    Total income: $______
    Spending Category Current Expenses New Budget
    Food:
    School lunches
    Restaurants & take-out
    Snacks
    Transportation:
    Car payment
    Insurance
    Gasoline
    Maintenance (estimate)
    Entertainment:
    Movies
    Music
    Games
    Sports and hobbies
    Personal care:
    Clothes
    Shoes
    Haircuts
    Accessories
    Cosmetics
    Savings (10–30% of income)
    Utilities:
    Phone
    Internet access
    Medical/dental
    Donations to charity
    Miscellaneous

Test Your Financial Fitness

  1. Listing List five ways you can start saving money. How much could
    you save in a year by cutting these costs?
  2. Explaining Why is it important to live on a budget?
  3. Applying Choose a career you like and research its average annual
    salary. Using that salary, construct a one-year budget plan using the
    budget worksheet above

Sample Solution

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