ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, December 30, 1996 TAG: 9612310008
SECTION: MONEY PAGE: 6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
It's that time again - the point at which we resolve that next year we really are going to gain control over our money.
For many people, keeping that resolution requires drawing up a budget as well as some good organization to prepare for taxes. So here, as reliably as the start of each new year, is the basic budget form for you to attack in 1997.
Besides preparing a budget that you can live with during the new year, you have two other tasks to get ready financially for Jan. 1.
One is to determine your net worth. You should list all your assets, such as your house and bank accounts, and all of your liabilities, including your mortgage balance and credit-card debts.
The difference between those two figures is your net worth, and it should be a positive figure with your assets exceeding your liabilities. Save your list and try to better the figure by the end of 1997.
The second is to set up an uncomplicated ledger book, a computer program or simply a notebook in which you will record all expenses that are tax deductible. Have a different page for each category, such as medical costs and interest expense. Resolve to write down every item as you spend money on throughout the year.
But the budget is the key to controlling your expenses, and you can use the form on this page to help you begin the task. Use the categories that apply to your situation.
The items with an asterisk in the adjacent sample budget are your fixed expenses such as your rent or mortgage payment and your insurance. Your regular loan payments fall in this classification, and so do regular and necessary expenses such as school tuition for your children.
The price of these categories is fixed, and you have little or no control over their cost outside of, for instance, moving to a cheaper apartment or transferring the kids to a less expensive college.
If you are trying to pay off a large credit-card balance, you may want to think of a specific monthly payment as a fixed expense as well.
List all of these expenses first.
Then record how much money you think you will spend on other necessary expenses that can vary in amount. These include utilities (electricity and gas), water, telephone, food and household supplies. Look at this year's bills or check stubs to help you arrive at realistic estimates.
Last, your budget should cover discretionary items, such as charitable contributions, gifts, entertainment, vacations, home improvements, clothing, recreation and hobbies.
You should be realistic about those items. Unless you are paying off serious debts, you know you will buy some clothes and go out for an occasional evening.
On the other hand, you must realize that major money leakages occur in the discretionary items. These are the expenses that are firmly under your control, and they can make or break your budget.
Don't overlook the savings category. You should plan to set aside money in savings first before you budget for other discretionary items.
You should have an emergency fund of three to six months' worth of living expenses. If you don't have it, you should be saving toward such a cushion to protect you from illness or a layoff. The emergency fund should be one of your short-term financial goals.
Then you can outline other short-term goals, such as a vacation or new furniture, and long-term savings targets, such as a child's college education or your retirement. You must determine how much money you need to set aside each month to meet those goals.
In the long run, you should aim to put 10 percent of your income into savings, holding the money in the form of certificates of deposit, 401(k) or similar retirement plans, Individual Retirement Accounts, mutual funds or stocks.
But if you have large outstanding debts on which you are paying high interest, such as on a credit card, it makes better financial sense to settle those debts first. You would then structure your budget accordingly.
When you have retired your debts, you can change your budget to show more savings.
The amount of your debt and your savings goals will determine how much money you will have for recreation and entertainment. Perhaps you will have to dine out less often or take a cheaper vacation until you are free of debt, but you should still budget for occasional recreational activities that your family enjoys.
Try living on the budget for a month or two and then modify it to reflect reality. You will also want to revise your money plan if you pay off a car loan, achieve one of your goals or experience a change in income.
If you can handle computers, you might want to try a financial management program such as Intuit's Quicken or Microsoft's Money. These programs help you to track all of your expenses by category.
Your computer can help you to compile your 1997 tax records, but you can accomplish the same thing with a notebook and some file folders.
Set aside a page in your notebook or on your computer for each tax-deductible item such as charitable contributions, medical costs and professional expenses. Resolve to record every expense in these categories the day you spend the money so you won't forget.
You should record the date, method of payment (such as the check number), the organization to which it was paid and the amount.
Set up an envelope or file folder for each category on Jan. 1. If you file away your bills or receipts by category as the year progresses, you will simplify preparation of your tax forms for 1977.
LENGTH: Medium: 100 lines ILLUSTRATION: GRAPHIC: Chart: Budget worksheet. color.by CNB