zero budgetting

[golfer4life21]

Hello. I have made an output table of my income and list of expenses. please see the attachment. I am trying to do the following, but i am pretty new to this:

1)What can i do to balance (or create a surplus in) my actual (or fictitious) budget?

2)Write a short narrative report on what would need to be done to “zero” balance the budget for each out-of-balance category. What categories could be altered to create a “zero” balance if the budget were in a surplus?

[disneysteve]

Every personal budget should balance. Since we are not governments or corporations, we can't issue bonds or debt instruments to allow us to operate at a deficit. If one category on your budget is over budget, you need to cut spending in another category to make up the difference.

Post your income and expenses and we can take a look and make any suggestions.

[golfer4life21]

yes!! please chk out my attachment. thanks once again.

[disneysteve]

I don't see an attachment. Can you post it to the thread?

[golfer4life21]

i sure will. sometimes it gives me a hard time since the output is in a form of table so the numbers wont align properly. here you go:

Enter the Gross Income for the family:
150000

Enter the actual monthly costs for the following categories:
Housing: 1800
Food: 700
Automobile: 300
Insurance: 100
Debt: 500
Entertainment: 500
Clothing: 500
Savings: 500
Medical/Dental: 100
Investments: 1000
Miscellaneous: 500

The Net Spendable for $150000.00 is $93000.00 a year and $7750.00 a month.

The budgeted spending costs are:

Category: Suggested % Yearly Monthly Actual Difference

Housing: 32% 29760.00 2480.00 1800.00 680.00

Food: 13% $ 12090.00 1007.50 700.00 307.50

Automobile: 13% 12090.00 1007.50 $ 300.00 $ 707.50

Insurance: 5% $4650.00 387.50 100.00 287.50

Debt: 5% 4650.00 387.50 500.00 -112.50

Entertain/Rec: 6% 5580.00 465.00 500.00 -35.00

Clothing: 5% 4650.00 387.50 500.00 -112.50

Savings: 5% 4650.00 387.50 500.00 -112.50

Med/Dental: 4% 3720.00 310.00 100.00 210.00

Investments: 5% 4650.00 387.50 1000.00 -612.50

Misc: 7% 6510.00 542.50 500.00 42.50

Total: 100% 93000.00 7750.00 6500.00 1250.00

This budget has a surplus of $1250.00 a month.

[minnie1928]

If I understand your numbers correctly, you have an extra $1250/month. If you are looking to increase that number, I'd take a serious look at your entertainment and clothing budgets...they seem very high. If you can cut them back and throw the money towards your debt, that would be productive. Also, what about your utilities? Are they included in your housing number?

[disneysteve]

If I understand your numbers correctly, you have an extra $1250/month. If you are looking to increase that number, I'd take a serious look at your entertainment and clothing budgets...they seem very high. If you can cut them back and throw the money towards your debt, that would be productive. Also, what about your utilities? Are they included in your housing number?

I agree. You are spending 11% on clothing and entertainment and only 10% toward savings and investments. Something is wrong with that. Cut way down on the clothing and entertainment, attack the debt and increase the savings rate.

Can you tell us more about the debt? What is the balance and interest rate (and what type of debt are you talking about)?

[Seeker]

I would also ask what's included in "miscellaneous"?

And your "groceries" budget also seems rather high... how large a family are you?

I agree with the others, clothing & entertainment seems unusually high too.

Currently you have a surplus in what's been written.... but things are missing if you're trying to create a zero-sum budget.

Do you have an emergency fund in place? And how many months of expenses are covered with that EF?

[Seeker]

Ok, if you click on the paperclip that appears in the thread listing, you can view the attachment properly aligned. I see what the OP is trying to do; and unfortunately html ignores spaces and alignment.

OP:
Your percentages are off, because I think your trying to hide stuff and fit everything into entertainment and finding it difficult to mesh the other categories with the reality of spending.

This is one of many guidelines on budgeting and recommended ratios:

Reducing debt, how to avoid the pitfalls of creeping debt.

Housing 35%
- Mortgage or rent, taxes, repairs, improvements, insurance, and utilities

Transportation 20%
- Monthly payments, gas, oil, repairs, insurance, parking & public transportation

Debt 15%
- Credit cards, personal loans, student loans & other debt payments

All other expenses 20%
- Food, insurance, prescriptions, doctor & dentist bills, clothing & personal

Investments & Savings 10%
- Stocks, bonds, cash reserves, retirement, rental real estate, art, etc.

The problem with ratios or percentages is the fact that some expenses are "variable" and some "constant or fixed."

Your numbers are very "rounded" shall we say? Maybe even hypothetical. But I'll play the game....

Going from the above:
housing = 35% (recommended)
yours = 32%

Transportation=20% (recommended)
yours:
Auto=13%
Insurance=5%

Debt=15% (recommended)
yours:
Debt=5%

All other expenses=20% (recommended)
yours:
food=13%
Ent/Rec=6%
Clothing=5%
Med & dental=4%
Miscellaneous=7%

Invest & Savings=10% (recommended)
yours:
Savings=5%
Investments=5%

---

Essentially, you've got a whole bunch of items lumped into a sort of "All other expenses" category. If the goal is to reduce debts, you need to move the numbers from that category to eliminating your debts.

Technically, that category is the most "adjustable" shall we say. The other expenses fall within "fixed" expenses and they are not something that you can easily adjust.

Budgets are not static... they do require adjusting as life happens. Everything changes with time... but the quickest way to a viable surplus, is always to reduce debts first.

Depending on your goals and age and savings, I'd probably recommend a higher ratio placed into savings and retirement than even the recommended.

But this would be a starting point based on the hypothetical numbers that you provided.

[Seeker]

Also, your linked chart shows Yearly, monthly, actual and the difference. The percentages are "suggested".... so the above outline I presented are also skewed and probably do not represent your true reality either.

You need another number or column with the actual percentages or ratios. Not a suggested percentage, but your actual.

Apparently, your mortgage or rent is 1800 "actual" a month. But the suggested probably also includes such constant expenses as utilities and repairs that (probably) are not included in your expense listing whatsoever; yet utilities are not usually a small enough number to ignore.

[golfer4life21]

I really want to take the time and thank you guys. I am very happy that you guys are taking the time and advising me. Thank you once again. I have taken all your points into consideration and will definitely make some adjustments. But, if i wanted to just stick to this format and not make an any necessary changes to the suggested percentages now, how would i be able to answer to those questions provided. for example, if we take the first question which says with my actual budget being at a surplus of $1250;

1) what can i do to balance(or create a surplus)in my actual budget.
what do they really mean by this statement? How can balance my actual budget just by looking at the balance? any inputs?

2) For the second, i do have an idea as to how to go about it. Really what they are trying to say what categories can be changed if the budget were in surplus. Does it mean i could distribute the 1250 towards each category until the balance comes to zero. so for example, since i have a -112.50 on my debt, i can reduce my debt by 112.50 and that would leave me with (1250-112.50). in addition, i could reduce my savings by 112.50 and that will leave me with (1250-112.50-112.50) and so on. can you please correct me if i am wrong.

thank you guys!

[disneysteve]

1) what can i do to balance my actual budget.

If you have a surplus each month, balancing your budget would mean knowing where that extra money goes. You could put it all toward debt reduction. You could put it toward savings. You could split it between the two.

If you have a deficit, you need to rejigger your numbers to make up the difference. For example, if you find income is $200 less than spending, you would need to find a place to cut spending by $200, probably clothing and/or entertainment in your case.

[golfer4life21]

Thank you. So i guess in my case, it would be a surplus of 1250 a month right. So what i could do is allocate that balance to the categories that mean the most to me right. So i could say increase savings by 400, increase debt reduction by 400, and the remaining 450 can go into investments? would this be correct? what does the debt category comprise of? also, the question states balance or create a surplus? Since my balance is already at a surplus, do they mean how i would create more surplus or do they just mean to balance out my surplus?

[disneysteve]

[QUOTE=golfer4life21;229868]what does the debt category comprise of?
You need to tell us that. What debts do you have? Mortgage, student loans, auto loan, credit cards, etc.

the question states balance or create a surplus? Since my balance is already at a surplus, do they mean how i would create more surplus or do they just mean to balance out my surplus?

Who is "they"? Where did this question come from? I'm not understanding what prompted the question considering you have a monthly surplus of $1,250 which is fantastic.

[golfer4life21]

they as in the question. When the question says to balance(or create surplus) in the actual budget, what does it mean when it says create surplus since i already have a surplus of 1250? sorry for the confusion.

Again, i was not trying to say what the debt comprised of. sorry for the confusion. what i meant is, when we say debt, what doe that actually mean? does it mean debt reduction or debt expense?