Envision Financial

Managing Your Income & Expenses

Keeping track of what's coming and going from your account can be tricky. But, with a little help, you'll be able to manage your finances with ease—as they say, a little advice goes a long way.

 

Managing your income

Most people have a pretty good idea how much they earn. However, it’s important to know just how much you have to spend so you can cover all your expenses, pay your debts and put some cash away for a rainy day.

  • When budgeting, make sure you’re working with your net income figure (the amount you take home after taxes) versus your gross income.
  • Know your income cycle—if you’re a seasonal employee, this will impact your cash flow throughout the year and you’ll need to budget accordingly.
  • Create a cash flow statement which outlines all your assets (savings/investments/things you own) and all your liabilities (debts). That way, you’ll have a good idea what your current financial situation is—this is a great starting point.

Managing Your Expenses

After determining how much money you or your household is bringing in each week, it is essential to identify where it is going. By making a list of all your expenses, you can get a good idea of what you are spending your money on.

  • While we can fairly easily identify our major expenses, you must remember that small purchases can quickly add up, too. For example, buying a $4.50 coffee every day will cost you $90 a month—more than the average monthly electricity bill.
  • Tracking and documenting your monthly expenses is important in creating an accurate budgeting tool.
  • Record fixed expenses which are typically the same each month, such as rent or mortgage, car payments, child-care, credit card payments, and savings.
  • Track variable expenses which vary from month to month, such as food, clothing, and utilities.
  • Calculate periodic expenses that occur annually, semi-annually, quarterly, or seasonally, such as car registration, auto or household maintenance, gifts, taxes, and insurance.

Tips for tracking expenses

  • Use checkbook registers and credit card statements to track your purchases.
  • If you find it challenging to account for a portion of your income, consider tracking your purchases for a month or two, no matter how large or small the purchase--this will make you more aware of your spending.
  • Track your expenses in a notebook you carry with you to avoid delay in recording your expenses—that way, you won’t forget.
  • Anyone in your family who has access to the bank account you pay your expenses from should also record their expenditures—total their expenses with yours for an accurate account.
  • To plan for periodic expenses, look through last year’s statements to find the amount you spent on things that did not fall into fixed and variable expenses. Divide that total amount by 12 so you can figure out how much to put aside each month.
  • By tracking expenses, you’ll be able to improve the accuracy of your expense estimates and create a budget you can stick to.

Tips for reducing expenses

  • Reduce fixed expenses such as rent/mortgage payments, car/lease payments, and insurance premiums through comparison shopping.
  • You could also reduce your fixed expenses by refinancing your mortgage or by raising the deductible on your insurance premiums.
  • Reduce the totals of some of your variable expense categories, rather than eliminating entire expense categories—making small spending adjustments across the board is easier to do.

Easy ways to curb your spending:

  • Eat out less often
  • Curb expensive habits like the expensive cup of java each morning
  • Shop around for the best prices on groceries—coupons are your best friend
  • Comparison shop services you pay for
  • Resist being an impulsive buyer—go into the store with a list
  • Call people at night as many cell phone companies have lower fees for evening calls
  • Consider commuting and share a gas bill, or use public transportation systems
  • Plan your vacations ahead of time to take advantage of savings on flights for booking early

 

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