First Person: How I Use a Budget to Manage My Personal Finances

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I know that not everyone is as interested in numbers as I am. I'm a CPA, what can I say? But, one thing that I absolutely have to keep on hand is a personal budget for our annual finances. I've created a budget for my family for several years. I am a visual person, and the big picture that a budget provides is exactly what I need to keep us on track throughout the year.

I use a Microsoft Excel spreadsheet to get started. With the twelve months listed across the top, I use the left-most column to list the different expenses and income that I expect to have. I try not to get too granular about it. After all, I'm not presenting this to anyone other than myself!

There are expenses that I have every month, like rent, utilities, cell phone service, cable/internet, and car payments. I know that my rent goes up every year, so I try to estimate what I think that increase will be and adjust the monthly costs accordingly. For personal expenses (i.e. food, gas, and entertainment), I have a generic "credit card" category that is all-encompassing. The trick to this is that I have to really consider what my plans are for the year. If I know that we will be traveling on certain months, I have to take into account the expected cost of the flights, rental cars, and/or hotels.

Another line item that I use is insurance. We have renter's insurance and car insurance that I have to take into consideration. These are what I call periodic payments, because they only occur once or twice per year. As much as I'd like to think that I can stick to the figures that I enter, I know that things tend to work out differently than planned. So, I try to include cushions in some of the expense categories that I think may vary.

Once all of my expenses are determined, I start to work on the income that I anticipate for the year. This includes salaries, bonuses, and tax refunds (if I'm lucky enough to not owe money). Sometimes, these numbers are not always known at the time that I create the budget. But, as soon as I am aware of monies coming into our household, I pull up my spreadsheet and make adjustments. That's the beauty of the budget for me. It is definitely a moving part in the chaos of my life, but it serves a purpose. And, I rely on it to determine what choices I should make from one month to the next.

I can't say that I'm always successful in sticking to my budget. But, I like to have a benchmark for my family. It may be a bit over-the-top for some people, and I understand that everyone operates differently. But, as long as I'm breathing, I'm budgeting. Without it, I wouldn't have a firm grasp on where I'm at with my finances. And, in this economy, I like to know exactly where I stand.

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