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Where Your Money Goes

Financial Planning Basics: Know where your money goes

Discover where your money goes. Even people earning high incomes can spend more than they make and feel unable to make progress toward important financial goals.

The best way to bring your spending into line is to prepare an income and expense summary that will show you where your money comes from and where it goes. You may think you know, but chances are this exercise will give you some real surprises. And only when you know the facts can you take steps to improve your financial life.

Take an hour or so - encourage your spouse and perhaps even your older children to participate in doing this income and expense summary.

Do an income and expense summary

Summarize your annual income, your fixed expenses, and your optional expenditures. Use your tax returns, your checkbook, and your charge card statements to get your figures as accurate as possible.

A two-year summary is best - last year and this year. Divide the current year into estimated figures and actual figures that you can fill in after this year is over. You'll find it informative to compare figures from year to year and to compare your estimated (budgeted) figures with actual figures.

When your summary is completed, examine it to see how you compare to these recommended maximum expenditures as percentages of total income:

  • Housing - 28%
  • Installment debt - 20%
  • Taxes - 20%

If your figures are significantly higher, investigate further to see if you need to make some changes.

Find money to invest

Your analysis of income and expenses should be done to determine where you can save money to use for investment. Remember, your net worth will not grow until you learn to stop working for every dollar and start putting your money to work for you.

Investing is the best way to assure yourself of having money for the financial goals you've established. For example, here's what saving $100 a month can grow to over a period of years.

$100 a month invested accumulates to the following amounts, assuming the given percentage represents the after-tax return:

# Years Invested

Total
Invested


At 6%


8%


10%


12%


14%

10

$12,000

$16,000

$18,000

$20,000

$23,000

$26,000

15

18,000

29,000

35,000

41,000

50,000

60,000

20

24,000

46,000

59,000

76,000

99,000

130,000

25

30,000

69,000

95,000

133,000

188,000

270,000

30

36,000

100,000

149,000

226,000

349,000

549,000

35

42,000

142,000

229,000

380,000

643,000

1,110,000

40

48,000

199,000

349,000

632,000

1,176,000

2,235,000

Need assistance?

If you would like help with this exercise or with finding ways to meet your financial goals, contact our office. We can help.

Mary Currie & Associates, Inc
Accountants and Consultants
PO Box 7806
3308 Sunset Ave
Rocky Mount, NC 27804
(252) 937-2131
Fax: (252) 937-2373
Email: curriecpa@aol.com

Member of NC Association of CPAs #23907