Butter Up Your Budget

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  • Ever wonder why you work so hard every month and have nothing to show for it?  It just feels like you are going month-to-month, and it’s a constant struggle.  Well, it all boils down to your budget – what comes in vs. what goes out.  When you are trying to balance your budget, there are two areas of adjustment:  your income and your expenses.  In many occasions, you can’t instantaneously change your income.  However, you can with your expenses.

    Want to quickly know whether or not you are spending more than you make?  Pull out your last 4 months of bank account statements.  If the balances are going up, then good for you!  You are saving!  But if the balances keep going down, you are in trouble.

    Regardless of whether your balances are up or down, you have to find out why.  Grab a piece of paper and write down all your monthly expenses that occur after you receive your paycheck.  It should include the following:

    • Housing (rent, mortgage, insurance, taxes, etc.)
    • Living (utilities, phone, TV, groceries (not going-out-to-eat), pet expenses, medications, etc.)
    • Transportation (car payments, gas, insurance, tolls, public transit, etc.)
    • Debt (student loans, credit cards (monthly payments towards past debt; charges from this month should be itemized in other categories of the budget), personal loans, equity lines of credit, etc.)
    • Insurance (health, disability, long-term care, life, etc. that are not paid for through your paycheck.)
    • Savings (savings account, investments, IRAs, etc. that are not paid through your paycheck.  Do not include 401k, 403b, 457, pension, etc.)
    • Investment Property (income, mortgage, expenses, etc.)
    • Leisure (going out to eat, memberships, subscriptions, monthly fun expenditures, etc.)
    • Miscellaneous (car repairs, coffee, clothing, odds-and-ends, etc.)

    Add these up and see how it compares against your monthly paycheck.  Where are some areas that you can adjust?  Typically, it’s the going-out-to-eat and miscellaneous expenses that can be improved upon.  Be reasonable.  If you bring in $3000 a month, and you’re spending $1000 a month on Coach purses and Louboutin shoes, maybe there’s a problem.  $500 a month on mani-pedis and the salon and can’t find a way to save?  It’s time to make some changes.

    A general rule of thumb is to save 10% of your monthly paycheck.  It’s a great place to start, but realistically, you really have to be saving at least 20%, if not 30% at a minimum.  If you think about how much it costs to simply retire AND buy a house, that’s a lot of money.  Add in a college fund for the kids and some traveling and there’s your 30%.  But most importantly, regardless of how much you are saving, just save.  Whether it is $300 a month or $30 a month, it’s better than $0 a month.  As you get comfortable, turn it up and save more.  By time you know it, you’ll amass a small fortune!  Or a college fund…Same difference.

    Dustin S. Ma is an independent financial advisor and president of LampPost Planning.  He based out of the Bay Area, CA, and can be contacted at (510) 488-3634,, or 2010 Crow Canyon Place, Suite 100, #404, San Ramon, CA 94583.

    These are the opinions of Dustin S. Ma and are for informational purposes only.  This article should not be construed or acted upon as individual investment advice.  Please contact your financial professional to discuss these topics.  Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.  Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge Investment Research, Inc, LampPost Planning, and are not affiliated entities.

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