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Building A Monthly Budget; Where To Begin?

For many people managing their expenses are one of the most difficult challenges they will face.   According to attorney James Miller of Miller and Miller Law, common advice is always "create a realistic budget to start", but what is realistic?  

"If you're having financial issues, being able to judge what you SHOULD be spending on certain items is likely already part of your problem," said Miller. "While everyone's expenses are going to vary based on things like family, location and specific need, there are some "target spending percentages" that individuals can strive toward". 

According to a group of US financial experts, a healthy, well planned budget of common expenditures would fall within the following categories.

·        Housing  35-45%Mortgage, rent, property taxes, insurance, repairs and improvements are all part of this category. Housing and utility expenses can vary significantly depending on geographic location and adjustments to the suggested budget percentages may need to be increased or decreased to allow for local conditions. Individuals and families in the lowest income range may find that they would need to consider alternatives housing arrangements (living with family members, sharing a house, etc) as expenses could exceed 60 to 75% of their income, leaving insufficient funds to pay for other basic budget items.

·        Utilities 8-15%: Gas, electricity, water, trash and telephone (landline and cell). If you are spending too much on utilities, consider switching cell phone providers, saving up for a more efficient furnace or conserving electricity.

·        Food 10-20%: All food items, dining out and pet food. On average, Americans spend 15% of their income on food. Watch out for fast food, which is a big budget buster. It's five times more expensive to dine out than to prepare the meals yourself.

·        Transportation 15-25%: Purchase and installment payments, gas and oil, repairs, insurance, parking & public transportation. Many of us have cars we can't really afford. If that includes you, consider trading your car for a  more affordable one. In  general,  leasing is a bad idea.

·        Medical 8-15%: Medical insurance premiums, prescriptions, doctor and dentist bills. Since medical bills don't come along every month, consumers should save funds within the 8 - 15%.

·        Clothing 3-5%: All clothing purchases, shoes, accessories and alterations. There is a lot of gender-biased pricing in this category; women may find this figure harder to maintain than men.

·        Personal & Misc. 5-10%: Miscellaneous club dues, admissions, hobbies, postage, tobacco, cosmetics, haircuts and cable TV. Chances are you spend far more than 10% in this category. Most of these are wants and not needs, so you shouldn't put this spending ahead of more vital items.

·        Savings 5-10%: It's crucial that you set aside this 10% for your goals.  One should not consider investing their funds until they have significant savings ($10,000 or more) in the bank.

·        Monthly Installments 10-20%: Installments, credit card payments, personal and student loans, and any other debt payments.

When planning a personal budget, using these averages can help individuals note money areas where they are doing well and those that may require some additional attention.  "Being aware of money habits and monitoring areas of overspending can help prevent real financial trouble for families and individuals," said Attorney Miller.  "Spending an hour or two to review your monthly budget is going to be time well spent."





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