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The Financial Puzzle: Putting the Pieces Together

Statements like “I have too much month at the end of the money” are often said as a joke. The reality of not having enough money to meet basic needs is no laughing matter. The best way to gain control of finances is to establish and manage a plan for spending. Planning for spending is a financial practice that many consumers fail to do. This leads to frustration with money matters and overuse of credit.


There are several steps that ensure success and put together the pieces of the financial puzzle. The worksheets provided could help determine where a family is, where they want to be, and how they can get there. The most important pieces to the puzzle are income, expenses, reserve accounts, and credit use.


Income. To find out where an individual is, determine how much money is available. Worksheet 1 will help determine all sources of income. The most common source of income for most families and individuals is take home pay from work outside of the home. Use monthly net income rather than monthly gross income when planning. With net income, or take home pay, deductions have already been made for many expenses. Don’t list these again on the expense sheet. Overtime pay and other sources of income that are not regular or reliable can be used as a resource but should not be included in monthly net income. Changes in economic conditions can lead to a sharp reduction in overtime opportunities.


Expenses. In order to plan for spending, it is important to know where the money is going. If this is not known, write down how much and where spending occurs each month. This can be as simple as using a pocket sized tablet and a pencil or a computer with some money management software. Once spending is known, planning can begin.


When filling out a monthly expense sheet (Worksheet 2) it is important to be as realistic and honest as possible. It is natural to underestimate expenses because it makes people feel in control. In the “current” column list all expenses. When completed, if they are too high, mark which expenses can be changed in the “adjusted” column. The “actual” column can be used to record actual spending for a month to determine how accurately current expenses are estimated. The “periodic” column is used to help determine reserve account amounts.

Reserve Account. Some bills are paid quarterly, semiannually, or annually such as car insurance and property taxes. Money needs to be set aside to pay these periodic expenses when they come due. The easiest way to do this is to place money needed for future bills into a separate account. Using a savings account will keep it out of the immediate reach and will actually earn some money (i.e. interest) as well. Figure the actual amount needed to set aside by following the directions supplied with Worksheets 2 and 3. This is the most important step in planning because one large annual bill can completely undo a spending plan and lead to excessive credit use.


Credit Use. There are many advantages to using credit if it is handled wisely. Misuse of credit can be very costly. Financial educators recommend that no more than 15 percent of monthly net income should be spent on credit payments. For example a household with $3,000 net income per month paying more than $450 in credit card payments is probably headed for trouble. This figure does not include house payments. Use Worksheet 4 to determine if credit use fits within these guidelines.


Putting It Together. Putting everything in writing is just the first step. It takes time to make adjustments that will make all the pieces come together. Once the plan is finalized, changes in financial habits may be required. These changes take time and energy. It can help to remember what your goals are and how good it feels to reach them. For more information on money management and other resources, please visit


Explanation of monthly expenses

  1. Savings is the most important part of expenses and should be figured first. Base this amount on savings goals that are established (example: $200 to go into Roth IRA or college savings fund).
  2. Rent or house payment– the actual amount paid per month for rent or mortgage payment. Include lot rent with a mobile home.
  3. Home repairs and maintenance– all the costs expended on the home during the year including: paint and wallpaper; yard care supplies; chemicals and treatment for a pool or septic tank. Add all of these and put total amount in the “periodic” column.
  4. Utilities– expenses for gas, electricity, water, and telephone (including cell phone and internet), trash pick up, sewer, etc.
  5. Cell phone and data plan and/or home phone- expenses for cell phone and/or home phone service and data plan plus extra charges for exceeding data plan.
  6. Internet access and extra data charges you may incur.
  7. Groceries– all food items purchased for preparing meals at home.
  8. Meals away from home– all meals eaten away from home; work and school lunches; snacks and colas, and dinners out.
  9. Toiletries– all personal care items: toothpaste, shampoo and hair care products, make-up, deodorant, cologne, soap and lotions; household cleaning supplies; detergents, trash bags, etc.
  10. Tobacco products (such as cigarettes, cigars, pipe or chewing tobacco) and alcoholic beverages.
  11. Diapers, formula, and baby supplies– things purchased regularly for baby care.
  12. Allowance, school expenses– any money given to children or other family members; expenses for school such as lab fees, cost of field trips, sports, special lessons and tutoring; and school supplies. If some of this is an irregular expense, remember to enter that amount in the “periodic” column.
  13. Barber, beauty shop– expenses for going to a shop for haircuts, coloring, or styling, as well as manicures. If some of this is an irregular expense, remember to enter that amount in the “periodic” column.
  14. Gasoline– the amount spent to fill up the car with gasoline. If this is a weekly expense, remember to multiply the weekly amount by 52 and divide by 12 to get a monthly amount.
  15. Car maintenance– this is difficult to determine because we don’t anticipate repairs. Base repairs on life of the car, the year, and repair records. Call a garage that specializes in a model to ask questions. In addition, figure out how much is spent in a year on oil changes, what is needed for replacing tires, and what it costs each year to get license tags replaced. Enter totals in the “periodic” column.
  16. Insurance– life, car, renters, health (if not deducted from paycheck), and property insurance not included in the mortgage payment. If car and house insurance are paid periodically enter totals in the “periodic” column.
  17. Medical– expenses for doctors; dentists; eyeglasses and contacts; medications; money to cover the deductible, co-pay, or out-of-pocket expenses on medical or health insurance.
  18. Clothing– clothing items, shoes and accessories. To get a good estimate, determine how often you shop, example; beginning of school year or summer sales, and how much is spent at these times. Total, and enter totals in the “periodic” column.
  19. Dry-cleaning and laundry– expenses for the washing and cleaning of clothes outside the home.
  20. Gifts– consider how many people are shopped for during the year, how much is spent per gift, and how much is spent on average for each gift-giving occasion. If you make most gifts, don’t forget to include the cost of materials. Enter your totals in the “periodic” column.
  21. Newspapers– cost of subscriptions for newspapers, magazines, record and video clubs, and costs for books and newspapers bought from the newsstand.
  22. Vacations, out of town trips– times when you leave town and spend extra on hotels, transportation, or dining out.
  23. Entertainment– Renting/purchasing DVDs, movie downloads, going to movies, concerts, plays, sporting events, pay-per-view, cable television, satellite payments, health club memberships, etc.
  24. Contributions– monetary contributions to church, or charities unless they are deducted from paycheck.
  25. Childcare/ child support– expenses paid to someone else for caring for a child, and any support paid to someone for child who does not live with you unless it is deducted from your check.
  26. Pet expenses– food, grooming, veterinarian visits, etc.; expenses for farm animals.
  27. Miscellaneous– any expenses not already included except for creditor bills. Consider income taxes; maintenance fees; property taxes or regime fees for property; professional fees etc.

    Explanation for filling out the bottom of the budget form

  28. Total of lines 1 through 25.
  29. Total monthly net income is the totaled amount from worksheet 1.
  30. The total of all the expenses from budget (line 26). Subtract this amount from net income (line 27).
  31. Amount left over from income to pay anyone else owed money.
  32. From Worksheet 4. If you already know your creditor payments and don’t intend to complete Worksheet 4 enter the amount here.
  33. Amount left is what is left after living expenses and paying creditors. This is money for other purposes like an emergency savings. If there is a significant amount left over, increase the savings amount in line 1 of the spending plan.
  34. *After adding the living expenses on your budget, go back and separately add the items in the “periodic” column. Only add expenses that you are not paying monthly. For instance if you pay insurance monthly instead of every 3 to 6 months, don’t add this in. This total gives you the amount of your monthly expenses that should be deposited into a separate account (your reserve account) each month for periodic bills. If you need more help determining periodic expenses you can use Worksheet 3. Remember this step can mean the difference between success and failure!


Worksheet 1


Worksheet 2


Worksheet 3


Worksheet 4


Sissy R. Osteen, Ph.D., CFP®

Associate Professor

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