What are your general household expenses?
The first question I ask any business owner is, “What is your overall cost?” Most business owners know this answer. If you ask someone on the street about their household overhead, they’d receive a blank-faced look.
What are your general household expenses? The term “overhead” is used quite a bit in business. Overheads are the daily cost and the monthly/yearly cost of operating your home. You’d be surprised how many people don’t know what it costs to “operate” their home. They think they know until they actually put pen to paper and write down all the costs. They are usually very surprised at how much money is actually wasted and where it all goes. And it goes pretty fast.
Just as business owners know their overhead, the same should be the case for those who run a household. And we all operate a household, whether it’s one person or a family of four. You must operate your home as a business, so you need to know how much it costs to run your home.
So let’s put paper to pencil. You need to know what you spend on the following:
Grocery and Restaurant Shopping: This includes weekly grocery shopping, eating out, takeout (pizza night, Chinese food night, etc.), convenience stops at the local grocery store, WAWA, 7-11, Circle K , Starbucks, Dunkin Donuts, local bagel shop, etc.
Automotive Costs
– Monthly car payment
– Gas and oil (Buying the cheapest gasoline for your car is not the best decision. Sometimes cheaper gasoline can cause problems for our cars and cost you more in the long run.)
– Oil change (It is true that you should change the oil every 3000 miles. It will make your car last longer).
– Repairs (should save $20-25 per paycheck for repairs)
– Parking lot
– Public transport
Housing/shelter costs
– Mortgage/Rent (If you are paying a mortgage, some people take advantage of the bi-monthly payment. The bi-monthly payment means that your mortgage company splits your monthly payment in half and automatically withdraws the payment twice a month. This is determined to be one additional payment per year and, in turn, could shorten the life of your 30-year home loan to 21-22 years, CDs, etc.)
– Property taxes
– Services (Electricity, Water, Sewerage, Gas, Garbage)
– Phone (many people are considering giving up their landline phone. This might be a good idea. If you don’t have your own business yet (and hopefully you will soon), why have more than one phone?
-Security alarm
– Repairs
Personal Costs
– Haircuts
– Toiletries
– Laundry
– Dry cleaning
– Childcare
– Gifts given
– Child allowance
– Clothes
– Vitamins/Supplements
loans
– Revolving charges, i.e. department store charges
– Student loan payments
– Alimony
insurance
– Health (add this to your budget even if your employer automatically deducts it from your paycheck)
– Mortgage Insurance (PMI-Private Mortgage Insurance)
– Renters insurance (I always recommend buying renters insurance. It’s very affordable).
– Disability
-Life
– Long-term medical care
– Automotive
Entertainment
– Concerts/Movies/DVD Rental
-Books
– Hobbies
– Memberships/Expires
– Vacation
– Subscriptions
-Toys
– Cable TV
Miscellaneous
– Medical copayments/coinsurance
– Odontology
– Vision
– Requirements
– Counter
– Lawyer
– Bank charges
– Educational Costs
– Shipping costs
– Any other expenses
investment
– Personal savings
-401K
-Charities
– Stocks/Bonds/Mutual Funds
Now that you have a budget outline, you must complete this form over a 3-month period. The reason for a 3 month period is because a one month snapshot is not enough for proper analysis.
After your 3 month analysis, you will be able to see where you spend your money and the cost of operating your home and lifestyle, therefore your personal lifestyle overhead. Armed with this information, you’ll be able to make changes and hopefully start saving more and spending smarter.
Please keep in mind as in business life changes. Sometimes change is slow (paying off your school loan) or sometimes fast (getting sick and needing to have your appendix removed right away). One should prepare for these changes to the best of their ability and one way is to save money in their bank, envelope, jar, etc. For the little “Uh-oh’s” in life.
It’s easier than you think to maintain/analyze your overhead. There are many computer programs that will do this for you. One of those programs is Quicken. There are many others. It will make your life (and your accountant’s) much easier. You can learn more at www.frompaintopersonalgain.com
I hope you have enjoyed this article.
Here is your health, wealth and happiness!