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Why Have A Budget Analysis
By Terry J. Rigg, Fri Dec 9th
Let's start by defining a "Budget Analysis". This is simply abreakdown of your budget (income, bills & expenses) showing howmuch money you have coming in and how much you have going out.It will show how your budget category percentages compare withwhat is recoginized as the ideal percentages. The most importantaspect of the Budget Analysis is the recomendations forimprovement. The first part of your analysis will list your income andbreakdown your bills and expenses by category. At BudgetStretcher I use only four categories, Housing, Other Bills,Household Expenses, and Savings. The three expense categoriesallow 30% of your take home for each category with 10% going tosavings. Next, your expenses percentages will be compared to the idealpercentages that will show you what areas of your budget needimprovement. The percentages above are simply targets. If youexceed
the recommended percentage in one category but you do notexceed 100% of your take home pay for all categories, then youwould not normally have a problem.
The recommendations for improvement are based on sound financialpractices. There isn't anything complicated about this, it ispretty much 2+2=4. However, there are some tricks that can berecommended to help make the figures add up a little easier. Asan example, if you have say 40% of your income going to theOther Bills category because of credit cards, it may berecommended that you try consolidating your credit cards tolower your payments. This can be done by either a consolidationloan, home equity loan or by using an existing credit card topay off all of the others. I would recommend a Budget Analysis for anyone that is havingproblems with paying their bills or anyone that consistantlypays their bills late. Also, if you have problems organizingyour bills or would like to reduce your debt, a budget analysismay be helpful. The next step is follow-up. No matter how thorough your budgetanalysis, you are going to have questions along the way. It isimportant that whoever is doing your budget analysis areavailable to answer these questions for as long as you need thehelp. A Budget Analysis is not the answer to all of your problems. Itis going to take time, organization and discipline to get yourfinances in order but it can point you in the right direction. About the author:Terry Rigg is the author of Living Within Your Means - The EasyWay http://www.homemoneyhelp.com/ebookadpage.html and editor ofThe FREE Budget Stretcher Newsletter and Budget Stretcher website http://www.homemoneyhelp.com. He has 25 years of experiencecounseling individuals and families concerning their personalfinances.
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