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Why you Should only use Three Categories for Your Expenses Budget

February 6, 2017 By C. Osvaldo Gomez 13 Comments

I teach an entrepreneurship and financial literacy elective to 8th graders.  I have learned that when it comes to the topic of family or personal budgets, simplicity works best.  I’ve seen all sorts of budget templates online, most of them unnecessarily complex.  While adding multiple categories can provide layers of detail to a household budget, it can hide or at minimum endorse, certain expenses. I teach them to simplify their expenses budget.

For the expense side, you only really need three categories: 1) Fixed costs 2) Variable costs and 3) Non-necessities.  When you add categories like, Transportation, Loans, Entertainment, Utilities, Daily Living, Housing, and so on, the budget sheet takes on a life of its own.  I get it, personalizing your family budget by adding columns, headings, and colors can be a ton of fun.  Not!  Sure, you may have been using the same budget template now for a decade and it works for you.


As the saying goes, “if it ain’t broke, don’t fix it.”  I too had been using the same budget template for several years.

Budget Template
Budget Template

As you can see from the picture, I had several categories and the Excel spread sheet allowed me to sort any way I needed.  I’ve seen templates with a similar style, a long laundry list of fixed and variable cost items all under an “expense” column.  While this may work, it’s not going to help (as much) when it comes to making a push to save more money.  After teaching my students using an example, balanced budget from PwC’s Earn Your Future Curriculum, I decided to adopt this style for my family, but not just because it’s simpler.

Three Expense Category Budget
Three Expense Category Budget

You don’t teach the skill of budgeting for the sake of your students knowing “how” to do it.  You teach the skill so that they know “why” they’re doing it.  So after the basics, I tell my students that the ultimate goal of a budget is to identify opportunities to cut spending.  “Wasting money is stupid,” I say to them.  “Plus the more money you save, the more you’ll have available to buy assets.”  Yes, they know what assets are by this point.

The PwC template makes it easy for me to provide my students with an easy to grasp savings strategy.  I ask, “If you were going to cut back your monthly expenses, where would you look to do so first?”  This template is so intuitive.  Of course the response is, “Non-necessities.”  This is why I love this budget style so much.  You are forced to differentiate your variable expenses.  More importantly, you are showing yourself the map to future potential savings.

Budgeting doesn’t have to be a chore.  And a budget should be a visual that doesn’t take an accounting degree to make sense of.  If an 8th grader can’t take one look at your budget and tell you where to slash, perhaps you’re making it too hard?

According to a 2013 Gallup pole, only 1 in 3 Americans prepare a “detailed” household budget.  Maybe it’s because Americans dislike being detailed?  What are your thoughts on household budgeting?  Please share your comments below.

Filed Under: budget, General Finance, Personal Finance Education, ShareMe Tagged With: budget, budgeting, expenses

5 Fun Ways to Educate Your Child about Money This Summer

May 12, 2015 By MelissaB 3 Comments

Ah, summer.  Your kids get to take a break from the school grind, and as a parent, you get to take a break from the homework grind.  While your child will likely have fun hanging out with friends, playing sports, going to the movies, and reading, now is the time for you to sneak in a little summer education.

Teaching our kids about money is one of the most important things we can do as parents.  What our children learn about money and see us do with money will likely affect them for years to come.  This summer, take the time to educate your children about money while making it fun.

TD Bank’s Summer Reading Program

Educate your child about moneyTD Bank has a summer reading program where your kids will earn $10 if they read 10 books.  TD Banks are mainly on the East coast, so not all kids can benefit from the reading program.  However, all kids can take advantage of TD Bank’s summer reading list for kids from Kindergarten to 7th grade.

The list is broken down by grade level, and each book suggested has a financial lesson.  For instance, one of the books for 7th grade is Money Hungry, a story about a young girl who is driven by greed.

TD Bank also has a section for parents that includes a story that you can read to children along with worksheets you can do with them.  In addition, there is a virtual stock game that your kids can play to practice investing in the stock market.

Dave Ramsey’s Financial Peace, Jr.

Dave Ramsey takes his advice and rolls it into a package for children.  Financial Peace, Jr. includes audio CDs as well as a workbook.  There are also cash envelopes, stickers, and other fun activities for kids.  This kit is for kids ages 3 to 12.  When two of my kids were 4 and 8, they loved listening to the CDs and doing the activities.

Nick Jr. Money Games and Activities

If you have little ones who are just starting to learn about money, why not try Nick Jr.’s Money Games and Activities.  These activities primarily help young kids differentiate coins and learn the value of each one.

Star Banks Adventure

T. Rowe Price has created this game as part of their Money Confident Kids program. This game will likely be appealing to kids thanks to the video game-like presentation. Parents will love that the program teaches kids about inflation, saving, spending wisely, and asset allocation, among other topics.  This game is available as an app and as an online game.

Board Games

On a long, hot summer day, nothing beats staying inside playing a board game.  Many classic board games offer your children entertainment AND financial education.  Some of my favorite for this purpose are Monopoly, Life, and Payday.

Use these activities a few times a week, and your child will not only have a fun summer, but one that is filled with financial lessons.

What are your favorite activities and games to teach your kids about money?

Filed Under: Children, Married Money, Personal Finance Education, ShareMe Tagged With: children, kids, money

2 Best Places to Start Fixing Your Finances

April 7, 2015 By Jeff @ Sustainable Life Blog 1 Comment

When I first started trying to get my finances under control, I had no idea where to start. I tried to follow a patchwork of ideas like pay yourself first and only spend X percent of your income on rent, but at the end of the month there would always be more month than money. I couldn’t figure out what I was doing wrong until someone asked where my money was going every month. Aside from food, rent, cell phone and credit card payments, I had absolutely no idea. It was such a simple question and the answer ended up keying my turn-around financially but it took me a while to realize that mattered.

So if you’re trying to turn your finances around and save a bit of money every month instead of wondering where it all went, here are the 2 best places to start fixing your finances.

Fixing your financesTrack What You Spend

As I found out, the most important thing is tracking your finances. When I started turning my ship around, there wasnt a lot of good financial tracking software like their is now. I started with a blank sheet of paper and a stack of bills, working those and my online logins to figure out how much I was spending every month. It’s much easier now, with the online trackers for your finances such as mint and apps that are more investment focused, like personal capital. Once you start tracking your income and expenses, you’ll know where you need to cut and how much you can use to save or pay off debt each month.

Cut the Excessive Expenses

Once you get your expenses written down, I’ve found it’s most valuable to lower your structural expenses as much as possible at first. This includes things like rent, car payments, car insurance, electricity, water, cell phones and cable tv. I’ve found that many people way overpay for cable TV (Calling up and getting a discount usually works wonders) and if they switch to an MNVO like ting or republic wireless they can usually lower their phone bill by 66% or more per month. For a family of 2 if they switched phones and totally ditched cable, that’s an immediate savings of 200+ per month. Once that’s done, add all that money to your savings or debt repayment. Then it’s time to move on to your car expenses. Consider selling your car and trading in for a cheaper one that you own outright, and can carry less insurance on. This will get rid of your car payment completely and hopefully lower your insurance by a significant amount as well. Better yet, try getting a bike and getting rid of your car completely.

In my opinion, those are the low hanging fruit – things you can easily change and your day to day existence wont be changed much one way or the other. The best part about this is you can spend a day or 2 over the course of a week and you should be able to easily pocket 500+ per month in savings – that’s 6,000 per year! Like you, I could use the extra 6k per year.

Once you get your structural issues fixed in your finances, it’s time to move on to your habitual purchases. Is there anything that you spend too much money on and dont get a lot of value from? Do you spend too much on fast food, or alcohol? Or maybe you buy too many books you’ll never be able to read, or too many movies on blue-ray you cant watch?

Now is the time to deal with those, and the easiest way that i’ve found is to get a budget set up and spend that in cash every month. Say you want to limit your blu-ray purchases to 25 bucks per month – get that amount in cash at the beginning of the month, then when the cash is no, no more blu-ray until your cash re-ups at the beginning of the month.

Filed Under: budget, Frugality, Personal Finance Education, Saving, ShareMe Tagged With: finances, Personal Finance, savings

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