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Reflect on Learning: If you’re gathering information about your mandatory expenses, where do you look? Answer: Bank statements/ATM, utility bills, credit card statements. Separate your expenses into categories of housing, food, health, personal, transportation, and finance, then itemize within those categories.
January Discretionary Expenses BUDGETED ACTUAL Movies/Concerts 50 65 Gym membership dues 25 25 Sports games 75 100 Clubbing 85 100 Clothes/shoes 85 100 Tech equipment 50 45 Hair Salon/Barber 35 45 Restaurant Meals 65 85 Puppy Training class 25 25 Gifts 40 20 Fees or penalties 0 35 Media (Netflix, Hulu etc.) 15 15 TOTAL DISCRETIONARY EXP 550 660 TOTAL MANDATORY EXP 1970 2055 TOTAL EXPENSES 2520 2715 TOTAL MONTHLY INCOME 3240 3160 TOTAL MONTHLY EXPENSES 2520 2715 VARIANCE 720 445 Reflect on Learning: Where would you look for information about your discretionary expenses? It’s easy to get this information! Log into your checking account. All of your transactions will have been recorded. PRODUCT PREVIEW STEP 3: Discretionary Expenses. Expenses that are more “want-driven” than need-based are discretionary . Depending on your lifestyle, the list can be extensive. In fact, you’d probably be shocked at the amount of money you spend discretionarily. Gym memberships, restaurant meals, tickets to the game, shopping sprees, and concerts are all discretionary. The point about discretionary expenses is that there is an element of choice in them so you actually have a great deal of control over these costs. Some may be fixed, unchanging from month- to-month. Some may be seasonal, such as the concert road trip you take every April or your summer vacation to the shore. Some discretionary expenses may be high priority for you. For example, your monthly concert budget may be more important than restaurant meals or gifts. Identifying discretionary expenses enables you to prioritize and offset them against one another when you’re low on funds. STEP 4: Reveal the Variance! Subtract total expenses from total income. In this case, there’s a surplus, but less than expected. Now you can go back through your budget and figure out exactly where the problem is.
Adjusting the Budget Budgets need periodic revising and adjusting. For example, as you become more successful in your career or business, your income will increase. Your expenses will also rise and become more diverse. Likewise, significant life changes such as getting married, having kids, or moving can increase expenses. A budget is a fluid, changing document — it should reflect your life changes.
Fin Lit Trivia Fin Lit Trivia Fin Lit Trivia
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thermostat. Source: rent.com
Chapter 14 | The Beauty of the Budget 266
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