A classic woman understands the value of a budget. She realizes its importance in maintaining order during times of emergencies and providing necessary boundaries for spending. To radiate that “cool, calm and collected” look, the classic woman keeps her house in order and uses a budget as the foundation of that orderly house.
The first step in creating a budget is to make a list all expenses:
- Property Taxes (if you pay them separately from your mortgage)
- Home Repairs
- Utilities: Water, Electric, Gas
- Health Insurance (if not deducted from you paycheck)
- Doctor Visits
- Dentist Visits
- Optical Visits
- Auto Insurance
- Auto Payments
- Auto Maintenance
- Personal Grooming
- Life Insurance Premiums
- Credit Card Payments
- Savings for Emergencies
- Educational Expenses
- Club/Professional Dues
- College Fund
Group monthly expenses into the following five major categories: Housing and Debt, Taxes, Insurance, Savings and Investments, and Living Expenses.
- Housing and Debt: rent/mortgage payment, utilities, credit card bills, loans — student loans, car loans, consolidation loans.
- Taxes: property taxes, car tags, income taxes and all those other taxes that come out of your paycheck. If you usually owe money at tax time, divide that amount by 12 and include it in the list
- Insurance: medical, dental, optical, life, disability, car, etc.
- Savings and Investments: all savings and investments
- Living Expenses: clothing, prescriptions, groceries, entertainment, child care, transportation cost, entertainment, childcare,charitable contributions, etc. This part is a little tricky, but try to estimate how much you spend on medical appointments (doctor, dentist, optometrist, etc) and glasses/contacts, etc. per year.
Total your expenses in each category and then find what percentage of your income they represent.
Note: To find the percentages, take monthly income and divide it by 100. Take the total amount for one expense category at a time and divide it by the number just found. The answer is the percent of income. For example, if the gross monthly income is $2500, divide that number by 100. The answer is 25. Next take the Housing and Debt expenses, which in this case we’ll say are $1000, divide that number by 25. The answer is 40. Therefore the Housing and Debt category accounts for 40% of the monthly income.
Compare the percentages with the ideal budget.
- Category Percent of Income Ideal Percent
- Housing and Debt 30%
- Taxes 25%
- Insurance 4%
- Savings and Investments 15%
- Living Expenses 26%
Although the “ideal” numbers are not set in stone, they are guidelines showing the health of a budget. They can be used as starting points that can be adjusted to the situation. For example, in some parts of the country, housing is a greater percentage of income than in others part of the country. Categories can be adjusted up or down, however, the classic woman knows that the one rule that can not be compromised is that Expenses Must Be Less Than Income.