| Tom thinks he has created an accurate budget now and hits the
“Calculate and Analyze” button again. It still says
he has not accounted for all his expenses. Now Tom must really
rack his brain, where else did his money go? Wait, that was the
month his friend had a big party and Tom bought the kegs because
his friend had rebuilt his transmission. $240 goes, well where?
The whole concept makes Tom think about budget items both for
that month and in general. If you really want to look at one month
and make sure things balance you can put the $240 under auto maintenance,
but Tom wants to have an idea of the year. This item does make
him think about other items, some months he has car items, sometimes
house items. He enters $240 into “Other House Expenses”
line, reflecting $100 for car maintenance, $40 for oil changes
and other minor items, and $100 for apartment things he did. Each month something happens that he has to spend money on or charge on a credit card, just because it might not be the exact same thing each month his budget must include the expense to make it a true picture of his income and expenses.
Now he was on a roll and adds $125 for clothes,
$25 for sports tickets, and $25 for dental (You may put this
under dental insurance or other). Many items you will pay for
all in one month, but in any given month some of these things
will occur. Tom recalculates again.
The budget calculator warns him he has over accounted for expenses or failed to include all income. After a making a nasty comment under his breath in frustration, he realizes he calculated his clothing expense way too high. He goes back onto the budget worksheet and adjusts the clothes entry to $25 and recalculates once more.
Finally the warning about not accounting for
all expenses or the warning about not including all income no longer appears. Tom finally has a real picture
of where he spends his money. He looks back at the piece of
paper where he wrote his original estimate of what he thought
he spent. He realizes that not understanding where his money
went and overspending lead to the root of his financial trouble.
Now pay attention to any other budget warnings.
Tom has three, he “lives beyond his means”, has
“negative cash flow” and is “getting deeper
into debt”. While Tom doesn’t like what it says,
these represent just what he feared. In the next phase the budget
program may be used to make proposed adjustments in the personal
budget.
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