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What This Course Will Cover
This course is designed to help you better manage your monetary life. The course will
offer a variety of useful financial food for thought. This lesson will help you figure out
your net worth and explain the basics of managing what you have, then help you set
realistic goals. Future lessons will tackle topics from debt management and building
savings for emergencies to investing for retirement and understanding the different
types of life, health, disability, and long-term care insurance to better determine the

right amount you need.
Even if you find yourself living paycheck to paycheck, this course will tell you how to
increase the power of the money you do earn. By making a few adjustments to how
you think about money and spending, you just might find that you don't need or want

to spend a buck a day on that lottery ticket.
What Are You Worth?
Do you know how much money you have in savings, off the top of your head? How
about the amount you owe to creditors? An alarming number of people don't.
Many people avoid doing the math because they are living beyond their means or
because the topic of money makes them uncomfortable. However, you can't begin a
solid plan for financial security until you take a look at your present situation.
Grab a pencil and a few sheets of paper or pull up your accounting software. (Note

that this exercise is for you and will not be shared with the group, so be honest.)

 
How Much Is Coming In?
First, we're going to take a look at how much money comes in to your household
each month. First, take a quick guess at how much your monthly after-tax income is.
Now use this calculator to find out what your monthly income really is.
Take a moment to think about this number. Is it more or less than what you thought?
By how much? If the difference is surprising, note how much you over- or underestimated
your income.
How Much Is Going Out?
This exercise is a bit more difficult and may take more time. However, it is critical that
you move forward with it before you continue with the lessons in this course. Be as
honest and thorough as you can be.
1. Gather together any evidence of your spending over the last two years --
canceled checks, ATM receipts, bank statements, credit card bills,
computerized records, etc.
By going back two years instead of just a few months, you will get a
much more accurate picture of your living expenses. You may have had
an unusual expenditure or two over the past year -- buying a new car or
paying for a child's wedding. In addition, just looking at a few months
may not show you all of your once-a-year expenses -- vacations,
medical visits, etc. -- that still need to be counted. So, while this will
take some time, it is most important that you get as close as possible to
two years of expenses.
It's also important to note that if you find that documentation is missing -
- bank statements are gone or you can't find your credit card bills -- it
will be important to pay closer attention to keeping your financial
records in order in the future. As a general rule of thumb, you should try
to keep records for a period of four years; not just so you can track your
expenses, but also for tax purposes. If you can't pull together this
documentation, go through your planner and whatever records you can
find and try to put together as close a financial picture as possible.
However, it is likely that some expenses will be missing, so this
exercise should be revisited once you have more financial documents
at your disposal.
1. Create a list of spending categories: Rent/mortgage, telephone, utilities,
groceries, etc. As you come across new expenses, create as many categories
as you need. Don't forget cash expenditures such as baby-sitting and gasoline,
once-a-year expenditures such as vacations, and necessary but irregular
expenses such as gifts and entertainment. You will want to attempt to keep the
non-recurring expenses separate from your regular monthly expenses, such
as vacation costs, wedding costs, etc.
2. Add together each of the categories and divide that number by 24 (the number
of months in two years). That is your average monthly expenditure for each
category.
3. Total the averages of each category and that's your average monthly
expenditure.
Again, take a look at the number that you guessed at the beginning of these

exercises. How close were you to that total?

 
Feb 21st 2008 05:06