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Let's start by defining a "Budget Analysis". This is simply
a breakdown of your budget (income, bills & expenses) showing how much
money you have coming in and how much you have going out. It will
show how your budget category percentages compare with what is
recognized as the ideal percentages. The most important aspect
of the Budget Analysis is the recommendations for improvement.
The first part of your analysis will list your income and breakdown
your bills and expenses by category. At Budget Stretcher I use only
four categories, Housing, Other Bills, Household Expenses, and
Savings. The three expense categories allow 30% of your take home
for each category with 10% going to savings.
Next, your expenses percentages will be compared to the ideal
percentages that will show you what areas of your budget
need improvement. The percentages above are simply targets. If
you exceed the recommended percentage in one category but you
do not exceed 100% of your take home pay for all categories, then
you would not normally have a problem.
The recommendations for improvement are based on sound financial
practices. There isn't anything complicated about this, it is
pretty much 2+2=4. However, there are some tricks that can be
recommended to help make the figures add up a little easier. As
an example, if you have say 40% of your income going to the Other
Bills category because of credit cards, it may be recommended that
you try consolidating your credit cards to lower your payments.
This can be done by either a consolidation loan, home equity
loan or by using an existing credit card to pay off all of the others.
I would recommend a Budget Analysis for anyone that is having
problems with paying their bills or anyone that consistently pays
their bills late. Also, if you have problems organizing your bills or
would like to reduce your debt, a budget analysis may be helpful.
The next step is follow-up. No matter how thorough your budget
analysis, you are going to have questions along the way. It is
important that whoever is doing your budget analysis are
available to answer these questions for as long as you need the help.
A Budget Analysis is not the answer to all of your problems. It is
going to take time, organization and discipline to get your finances
in order but it can point you in the right direction.
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