Basic financial literacy is key to a successful life. Whether you are just starting your career, are already established in life, or are planning for retirement, the team at The Woman’s Report is dedicated to bringing you news, information, and practical tools you can use to understand and manage your finances.

Attached you will find two templates to help you get started. The first one is a Monthly Budget. It is a comprehensive list of common expenditures many of us have each month. There may be more here than you need or, conversely, you may need to add some items. Use it as a starting point to understand your monthly financial obligations and how much money you have remaining after you pay your bills to save, invest, and spend. A few things to note:

  1. For expenses that occur in intervals that are not monthly (i.e. weekly or annually) divide them into a monthly amount so you can clearly see your cash flow. Amortize annual expenses, such as real estate taxes, over all 12 months (be sure you’re saving the right amount every month to pay the bill when it comes due).                                         
  2. Use an average for bills that vary throughout the year. For example, depending on where you live your electric bill might be higher in the winter when the heat is on, or it might be higher in the summer when you are using the air conditioning. Find the average and use that amount every month for your budget. The key here is not to use the lowest amount, which will get you into trouble during the higher months, and not to use the highest amount because the unused money could be deployed better elsewhere. Strive for accuracy. That said, if you have a 12-month history for a variable expense (like electricity) than you may want to use that.                                                      
  3. Fill in your basic necessities (food, shelter, etc.) first. It’s best to think of saving as a necessity. Many financial professionals, such as Suze Orman, recommend you “pay yourself first,” which means, think of saving money as a fixed cost, not a choice.                                                                                                                                                       
  4. Then fill in the discretionary items (like dining out or entertainment).  Also don’t forget incidentals, such as birthday gifts, holiday expenditures, etc. If you budget for them, the money will be there when you need it.                                                                            
  5. If you own a vacation home or investment property, make sure to add all the related expenses to your monthly budget as well.                                                                          
  6. When you’re finished filling in the blanks, add it all up and compare it to your monthly income to see where you stand and what adjustments need to be made.

A good rule of thumb is to have at least six months of living expenses in your savings account. It might take you some time to get there, but it’s a very good goal. This money will be there in case of an emergency like an illness, job loss, or divorce.

The second template is a Personal Balance Sheet. The left side is for assets; the right side is for liabilities. An asset is something you own, such as cash, a car or a house; a liability is something you owe, like a mortgage, credit card debt, or a student loan. You must own something for it to be considered an asset. For example, if you bought your car, it’s an asset and you can list it on the left side of your balance sheet. If you lease your car, it is not an asset and does not go on your balance sheet, but the monthly payments go on your monthly budget

List the present value of the assets you own (like your home, car, etc.) on the left side of your balance sheet as assets.  List the total amount of outstanding payments for these assets on the right side of your balance sheet as liabilities.  For example, if the present value of your home is $500,000, list that on the left.  If the total of all your remaining mortgage payments equal $250,000, list that on the right.  Do this for all of your assets.

The Internet is the fastest way to get a present value on your assets.  There are many websites that make this quick and easy.  Try Kelley Blue Book (www.kbb.com) or Edmunds (www.edmunds.com) for cars and Zillow (www.zillow.com) for real estate.

For your 401K or IRA, list the current value as an asset.

When you’re finished, total up both sides of your balance sheet. The difference between your assets and your liabilities is your net worth. Having a clear picture of where you are now will allow you to set goals and plan for your future.  It will also allow you to relook at your monthly budget and make necessary changes.

Both of these tools are just the beginning. Meet with a certified financial professional to develop a strategy to meet your financial goals. It’s never too late to make a plan.

Balance Sheet Template

Monthly Budget Template