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Budgeting Basics – Fixed Expenses
Creating a budget for yourself and your family can be difficult if you think you are not so good with numbers or perhaps you are just not familiar with all the bills that come and go from your home.
To help you understand more about creating a household budget, and forming your own budget that will build a solid financial future for your family, I want to tell you about fixed expenses, and what luxuries are.
There are a few gray lines between the wants, needs and luxuries in life, and understanding what your bills are in comparison to each other when creating a budget will help you learn where to cut back more when you are formulating a budget.
There are three types of expenses that every ‘bill’ will fall into, but you may have to think about each one in detail before you can actually categorize them. These three types are:
The first is the unavoidable expense. The unavoidable expense is something that you have to pay no matter what to continue living the way you do at the current time.
The second type of expense is the savings and rainy day type of expenses that you have.
The third type of bills or expense that you have are the day to day living expenses which are the type that are most flexible and the types of bills that you can learn to cut back on and create an additional savings with.
What you are going to need to do is start with three separate sheets of paper. On these three sheets of paper you are going to list your have to expenses, such as the mortgage, the insurance, the taxes. There are no real ways to lower these bills right away so they are have to expenses. We can work on lowering these bills in another article, here we are going to focus on separating bills.
On another sheet of paper, you need to list how you are preparing yourself for problems. Such as ten dollars, every pay to the savings account. Purchasing a savings bond every three months or deductions to your retirement account.
On yet another sheet of paper, you want to list all of your utilities, the bills like the credit cards, the credit lines, and money you spend on groceries, the phones, the internet and cable. These are the bills that you can easily change, by cutting back on the expenses and the expenses that you do not need as much as the have to pay bills.
Along with the expenses we have listed you also need to include on your listings: rent, mortgage, and lease payments. Taxes on your house, land you own, and land you are renting as vacation spots. Insurance on your home, auto, and your self are additional have to pay expenses that sometimes are forgotten about.
Household bills such as your cable, telephone, dsl, your internet provider and your fax number are bills that could be lowered or consolidated. Look for ways to cut these bills where ever possible.
Medical and dental insurance payments or payments are other types of expenses that you will need to include in your budget at some point. These are most likely payments that will not change so you have to include them on your have to pay listing for a healthy family.
Bus tickets, cab fare, auto gas, and car pool parking passes are other types of expenses that should be included on your expense listings, sometimes you may be able to cut these expenses even further, you will have to investigate a little on this.
Memberships, club accounts, professional association fees, and magazine subscriptions are a type of expense that you will have to review and judge their value before keeping them on your expense listing. If they are must haves, you should include them in your expense listing. If you don’t need them, try to avoid having them.
It is going to take some time to list all of the expenses that your household may occur during the year, but over the course of a month you can continue to write expenses down on your lists so you can start to work on your budget when you have finished.
Additional expenses that are often forgotten when one is creating a budget are the, children’s lunch expenses, day care, lessons, sport fees, gifts, book fairs, shoes, clothes, and such. Birthday’s, holidays, decorations, collectibles, and even traveling to picnics, parks, fairs, and such should be somehow included in your expense listing for a practical budget that will continue to work for your family.