eXtension.org Personal Finance Offers Money Management Tools for Tough Economic Times

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A free online resource, extension.org, provides expert personal financial planning advice.

people don't plan to fail; they fail to plan.

ups in the cost of food, gasoline, and utilities, not to mention high ongoing costs for health care and subprime mortgages that are resetting to higher monthly payments, many families are feeling the pinch. extension.org has several online resources to assist with financial planning.

It is not uncommon for some households to be paying $100 a month more for food and gasoline than they were a year ago. That $200 extra in monthly spending has to come from somewhere and a spending plan can help "find" it. If a consumer has a specific question about developing a spending plan, real live personal finance experts - often university professors - monitor and answer questions through extension.org at no cost to the question-asker.

A spending plan is a plan for spending and saving money. In other words, a comparison of what you earn (income) and where the money goes (savings and household expenses). A spending plan provides direction for future spending so that there is sufficient income with which to pay expenses. By creating your own spending plan, you can start saving money now and perhaps be able to enjoy that Labor Day weekend trip you were hoping for.

Financial planning experts all agree that there are three sustainable ways to get monthly cash flow in line in a spending plan so that household expenses (including savings) are less than or equal to income: increase income, reduce expenses, or do a little of both.

If you have never bothered to prepare a spending plan before, now is the time to start.

1) Make a list of what you earn and spend.
Household earnings include net (after-tax) income, benefit payments (e.g., Social Security, unemployment, disability), child support or alimony, public assistance, self employment income, interest on savings and investments, and other income sources.

2) Once you total monthly income, do the same for expenses.
Using spending records as a guide, list fixed expenses such as housing, car loan payments, and insurance premiums.

3) Next, list flexible expenses such as food, transportation, and gifts.

4) Make a list of periodic expenses and divide the annual by cost by 12 to arrive at a monthly cost. For example, $4,000 of annual property taxes costs $333 monthly.
Be sure to set aside money for financial goals as a monthly "expense."

5) If you lack an emergency fund of at least three months' expenses, include a "line item" in your spending plan to gradually build up your cash reserves.

6) If you have access to "automated" savings plans, such as a 401(k), sign up today. Even a small amount of savings (e.g., $20 per paycheck) will grow substantially over time.

Spending plans should balance the "bottom line." In other words income should equal expenses, including savings. It generally takes several attempts to get the numbers to balance out. This is perfectly normal and to be expected.

Remember, "people don't plan to fail; they fail to plan." A spending plan can help you cope in tough economic times.

For more helpful tips like these, visit eXtension.org.

About eXtension
eXtension.org is unlike any other search engine or information-based Web site. It's a space where university content providers gather and produce new educational and information resources on wide-ranging topics. Because it's available to students, researchers, clinicians, professors, as well as the general public, at any time from any Internet connection, eXtension helps solve real-life problems in real time.

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Katie Gaultney
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