Having enough money to live and pay debts are important concerns of many people. Managing money is a challenge despite personal income. Bankruptcy proceedings disclose a lot about peoples’ spending habits. Recently, Rapper 50 Cent indicated to a Connecticut bankruptcy court that he spends $108,000 per month which includes items such as personal wardrobe, child support, and gardening expenses (Nededog). In a business re-organization in 1990, presidential hopeful, Donald Trump agreed with his creditors to limit his monthly spending to $450,000. The New York Times reported, “Mr. Trump would have to hold his expenses to just $14,516.13 a day” (Eichenwald). On the other end of the income scale the average annual family income is $66,877, and that average family spends $53,495 in expenses to live (USBLS). Without understanding how to control money, it is easy to see how over spending can happen.
There are four obstacles to controlling money: awareness of how money is spent, the time to learn about managing personal income and having the ability to cut spending or earn beyond current expenditures. There are a lot of famous people and everyday people that are challenged by the ability to manage their finances. Making a lot of money is not an indicator that a person has the tools to manage their finances well.
People in our society are stretching their time thin and have little ability to make more money. Gallup, Inc. reports that on a weekly basis “half of full-time workers […]work more than 40 hours […] nearly 4 in 10 say they work at least 50 hours”(Saad). So that brings up the question of how can a person have better control over their finances?
Creating a personal income statement can help develop an awareness of how money is spent. Make a list of all expenses. There is no need for a complicated system.
This is a list of recognized expenses developed from the United States Justice Department’ Means Test (USDJ):
- Apparel and services
- Housekeeping supplies
- Personal care & miscellaneous
- Out of pocket healthcare expenses
- Health Insurance
- Disability Insurance
- Health Savings Account Expense
- Non- mortgage expenses
- Transportation awareness of how money is spent
- Vehicle Operation/public transportation expense
- Life Insurance
- Court-ordered payments
- Education for employment or physically or mentally challenged child
- Charitable Contributions
To create a personal income statement, transfer the past three months or whatever period is comfortable to an Excel spreadsheet or print a copy. Identify the expenses that occur every month and organize them in a way that is personally understandable. This effort will take some time; however that is a small price to pay for the benefits of better financial control. 50 Cent and Donald Trump probably have an accountant to do this for them however unless expenses and income are complicated that is not necessary.
Developing an expense spreadsheet will help bring out an awareness of exactly where money is being spent. It should also serve as an indicator of essential items that money should be spent on such as life insurance, health insurance, and disability insurance. The average family spends $5,726 on personal insurance and retirement plans (USBLS). Plan for the unexpected events in life because they will happen with or without planning.
Family, work, self and community are challenges that use up the 168 hours a week that represents every person’s life. Gaining control over personal finances can make that time happier and less stressful. Managing personal finances begins by gaining an awareness of where money is being spent; learn how to control expenditures and plan for the unexpected.
Eichenwald, Kurt. “Quick: Who’d Have Trouble Living on $450,000 a Month?” The New York Times. The New York Times, 25 June 1990. Web. 22 Oct. 2015.
Nededog, Jethro. “50 Cent Admits He Spends $108,000 per Month on Things like Grooming, Gardening and Clothing.” Business Insider. Business Insider, Inc, 4 Aug. 2015. Web. 22 Oct. 2015.
Saad, Lydia. “The “40-Hour” Workweek Is Actually Longer — by Seven Hours.” Gallup.com. 29 Aug. 2014. Web. 23 Oct. 2015.
Skidmore, Gage. “Donald Trump speaking at CPAC in Washington D.C.”. 10 February 2011. Wikimedia Commons.Web. 22 Oct. 2015
Westman, Rickard. “50 Cent @ Globen”. 27 December 2009. Wikimedia Commons. Web. 22 Oct. 2015
United States Department of Justice. “U.S. Trustee Program’s Postion on Legal Issues Arising Under the Chapter 7 Means Test.” Justice.gov. 23 Apr. 2010. Web. 23 Oct. 2015.
United States Bureau of Labor Statistics, “Consumer Expenditures–2014.” U.S. Bureau of Labor Statistics. 3 Sept. 2015. Web. 23 Oct. 2015.