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aside a ñxed percentage for future
obligations) is, however, not how most
of us go about our money matters.
Instead, the technique most of us use
today appears to be to pay whatever
bilis that have come in since the last
check with whatever money is on haud .
Tome, this is not budgeting. The fixed
percentage method is! Here is how it
works:
1 first make up a
basic spending
sched11le
when I set up my budget
or whenever a required change takes
place in my income or outgo.
To do this:
l.
I list all expected expenses for
the next year. Last year's bilis are
a good guide to help make estimates.
I guess if I have to, but I don't miss
anything! Missed items, unless minor,
will break the budget when they are
due.
2. I then calculate what the yearly
amounts represent on the basis of
each pay period.
If
you are paid
monthly, divide by
12;
if weekly,
divide by 52, etc. Write these figures
beside the yearly amount.
This now provides a
basic spending
schedule
of how to handle each check
oc
pay packet as it comes in. To pay
a $200 per month rent bill from a
weekly pay period, foc example, set
aside $50 from each paycheck. (In
England the figures might be
t1
O
per week for a
L40
monthly rent.)
If
you handle all expenses in this man–
ner, you should spend all paychecks
almost identically.
No longer do I have the agony of
matching each bill to a specific pay
check, month after month. Frankly,
it is ridkulous to make each pay period
a brand new mathematical battle scene
when you spend quite consistently,
viewed over the period of a year.
Just follow my
basic spending
sched11le
each time and the bill
juggling will automatically take care
of itself.
Keeping Records
There are a few records that you
wil! have to keep, however. There
aren't many, and they are not difficult.
14
1 use double- or triple-entry ledger
paper from the local stationery shop.
You might prefer one of the many
commercially prepared budget record
books. Even an ordinary notebook
with ruled vertical lines is completely
satisfactory.
l designate one page for each broad
category of yearly expense. About a
dozen categories are enough.
If
you
have too many categories, the amount
of record keeping becomes excessive
and budgeting will become burden–
some.
Each page is like an ordinary check–
book ·register. On it, 1 show deposits
and withdrawals. The deposits are
made according to the
basic spending
schedule,
as calculated above. The
withdrawals take place when the bilis
come in.
The money itself can
be
kept in
a lump sum, either as cash or in a
bank account. Many will find both
methods usefu!. For small cash items
like pocket money, allowances, bus
faces, lunch money, etc., it is best to
keep the funds at home in individual
envelopes, one for each category. For
normal pay-by-mail bills, it might be
best for safety reasons to keep the
money in the bank.
Once established, the method of
budgeting just described provides two
substantial benefits that lead to the
fundamental solution of most people's
budget inadequacies. First, it takes
away the bookkeeping brainwork.
This alone is enough to keep many
from even trying to budget. Second,
it exerts a powerful brake on irrespon–
sible spending. Before 1 began to
budget in this way, 1 used
to
have
cash in my pocket but neve¡: knew
what 1 should spend it for. 1 knew it
was probably committed to bills that
would arrive within a. few days, but
I would often forget and spend it
on something I could not really afford
to purchase.
But now, by quick reference to my
little budget book, 1 can immediately
tell what money is free and what
isn't. This in itself is an enjoyable
benefit. Now, when 1 indulge in a
little pleasure spending, 1 know that
I am not spending money that is
needed elsewhere.
Try this system. lt really works!
Problem Two - Misuse of
Credit
Prior to World War 11, the use of
credit by the average family was very
limited and poody accepted. To mort–
gage one's home was an indication of
serious financia! difficulty akin to going
to the poorhouse.
It was possible, at the time, to buy
a car "on time," aod smallloans from
the bank did exist. But the volume
was small. The world of credit buying
had not come into its own.
Since that time, the spread of credit
has been phenomenal, not just in
the U. S., but worldwide. Today the
wonderful world of instant spending
is one of society's most basic features.
But what about using credit?
Should
you
plunge into credit buying
like most of your neighbors? Or would
it be a mistake ? Lack of understand–
ing in this area may be your big
problem.
Credit - Good ot Bad
It would be foolish for anyone to
say that credit, of itself, is entirely
wrong. On the business leve! espe–
cially, the proper use of credit has
significantly facilitated the flow of
goods and services. On the personal
leve! also, much could
be
said of the
potential benefits for the consumer.
Credit cards, for example, eliminate
the nuisance and sorne of the dangers
of carrying cash. Long-term, low–
interest loans make available larger
items such as bornes or cars that many
people would otherwise be unable to
buy for many years.
Yet clearly, many young families
seem to suffer from numerous credit
pitfalls. Charles Neal, Director of
Financia! Counseling for the American
Instítute of Family Relations points
out why:
"The cause in almost every case
[of personal bankruptcy) was
OVER–
USE OF CREDIT -
in other words,
PLAIN TRUTH
June
1972