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Thursday, June 9, 2011

Are you living paycheck to paycheck? Do you have money enough to accomplish your goals?

"Finding" money for the things you want in life can be challenging!

Since you can only spend a dollar once, allocating money for your goals or things you want requires you to look at your current spending habits. Do you ever have a $20 bill in the morning, and by evening it is gone and you can't remember what you bought? Do you ever go to write a check, only to find that your account is tapped out?

If you answered "yes" to any of the above questions, consider writing down every penny you spend. Yes, even on a package of gum. Challenge all members of the household to participate in this process. Once you have tracked your spending for a month, it is time to step back and analyze your spending.

Include all adult members of the household, and children who spend money, in the discussion. Together you can develop an overall picture of your family's needs, goals and wants. Now consider the occasional expenses, like property taxes, car license, and insurance. Remember things like vacations, gifts, holiday expenses, school supplies and fees, memberships, and other expenses that occur less than once a month. Often these are the things that bust a family's budget!

Once you have identified your occasional expenses, decide how to plug them into your spending plan. One suggestion is to total up what is needed for each occasional expense, divide that amount by the number of pay periods before the money is needed and set that amount aside in a savings account, money market, etc. By doing this you will have the money available when it is needed.

Next consider your goals. As a family, write your goals, listing the date when you would like to realize the goal, the projected cost, and the number of pay periods before you want the money. Then divide the projected amount by the number of pay periods to learn how much you need to save from each paycheck. For example, if your goal is to buy a sofa in a year at a cost of $600, you would need to save $50 each monthly check or if you are paid bi-weekly $25 from each check. This sounds more realistic than talking about coming up with $600!

You may want to plan for short, intermediate and long-term goals. . . saving some money for each from every paycheck. One such goal would be an emergency fund. "Emergencies" happen to all of us. We just don't know when or how much they will cost. Sometimes the car or refrigerator needs repairs, you need to attend a funeral in another state, a job is lost, or someone has a medical emergency. We never know! Three to six months of basic family living is encouraged.

What is basic family living? Food, rent or mortgage, utilities, car payments, insurance and necessary clothing would be included. You may also wish to add other payments, student loans, or credit card minimums, if your savings allow.

It may take several months to fund your emergency account. Each pay period you will want to add to your fund until you arrive at your desired amount.