Your spending versus income
An important part of financial stability, no matter who you are, comparing your total spending versus income for your household allows you to take control of your financial situation. In order to show you how you can get a handle on your money, here are a few steps to get you on your way.
Get your slips together
Start off by grabbing some stationary- pen, pencil, paper pad and calculator- and setting up an area to work.
Gather together all your slips, receipts and needed financial information:
- Receipts of major purchases- not including credit card accounts
- Record of credit card expenses over the past 12 months
- Cheque registers- your personal record of your checking account
- Records of income, direct deposits, deposits, payslips as well as business records.
- Bank statements
Gathering this information from both yourself and your spouse allows you to have a clear and concise image of your household spend over the course of the year. All the better for comparing your spending to your income.
Split your expenses
Creating categories to divide your expenses into also allows you to accurately compare spending versus income. Breaking these into three categories is advisable, however you can go further if your expenses require it. We have divided them up as follows:
- Fixed expenses: These are expenses that remain constant from month to month, like rent, mortgage or set payments.
- Variable expenses: These are expenses that vary in amount from month to month, the best examples of these would be groceries, utilities, and daily expenses for work or leisure.
- Periodic expenses: These expenses may be fixed or variable, however they are separated as they are paid once in a while, on a less regular basis- be it every six months or once a year. Items that fall under this bracket include school fees, taxes and some insurance premiums.
Calculate your annual debt and expense
Calculate the total amount for your debt and living expenses that must be paid annually, for both you and your spouse. Compare your spending versus income to get an over all idea of where your financial stability stands.
Consolidate casual expenses
These expenses are ones that should be minimized as soon as possible or when you can go without them. For a month, you and your spouse must record every cash, debit or credit spend on nonessential items. Once a month has been recorded, times it by 12 to get a rough annual estimate.
Once you have a good, clear outline of your expenses, you can compare them to your overall income to see how much you are saving and where you could improve your spending. Often nonessential items can be cut down and the funds shifted to get more bang for your buck.