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 your household overhead, you would get a blank face expression.
What are the general expenses of your home? The term “overhead” is used quite a bit in business. Overhead costs are the daily cost and the monthly / annual cost of operating your home. You will be surprised how many people do not know what it costs to “operate” their home. They think they know until they put the pencil on the paper and write down all the costs. They are usually very surprised at how much money is wasted and where it all goes. And it goes pretty fast.
Just as business owners know their overhead, the same should be true for those who run a home. And we all operate a household, whether it’s a single person or a family of four. You must operate your home like a business, therefore you need to know how much it costs to operate your home.
So let’s put paper in pencil. You need to know what you spend on the following:
Grocery and Restaurant Shopping: This includes weekly grocery shopping, dining out at restaurants, take-out (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.
– Monthly car payment
– Gas and oil (Buying the cheapest gasoline for your car is not the best measure. Sometimes cheaper gasoline can cause problems for our cars and, in turn, 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 divides your monthly payment in two and automatically withdraws the payment twice a month. To be an additional payment per year and , in turn, it could shorten the life of your mortgage loan from 30 years to 21-22 years. Some people do not want to give their mortgage company more than they should and prefer to invest the money in stocks, CDs, etc.)
– Property taxes
– Utilities (electricity, water, sewer, gas, trash)
– Telephone (Many people are considering leaving their landline. This might be a good idea. If you don’t have a business of your own yet (and hopefully you will soon), why have more than one phone?
– Security alarm
– Dirty clothes
– dry cleaning
– Gifts delivered
– Child benefit
– Vitamins / Supplements
– Revolving charges, that is, charges for stores
– Student loan payments
– 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 is very affordable).
– Long-term health care
– Concerts / Movies / DVD rental
– Memberships / Expiration
– Cable TV
– Co-country / medical coinsurance
– Bank charges
– Educational costs
– Shipping costs
– Any other expense
– Personal savings
– Stocks / Bonds / Mutual Funds
Now that you have a budget outline, you must complete this form for a period of 3 months. The reason for a 3-month period is that a one-month snapshot is not sufficient for proper analysis.
After your 3-month analysis, you will be able to see where you spend your money and the cost of running your home and lifestyle, hence your personal lifestyle overhead. With this information, you can make changes and hopefully start saving more and spending smarter.
Please be aware of changes in business life. Sometimes the change is slow (paying off your school loan) or sometimes fast (you get sick and need your appendix removed right away). One should prepare for these changes to the best of his ability and one way is to save money in his bank, envelope, jar, etc. for the little “Uh-oh’s” of life.
It is easier than you think to maintain / analyze your overhead. There are many computer programs that will do it for you. One such program is Quicken. There are many others. It will make your life (and your accountant’s) much easier. You can get more information at www.frompaintopersonalgain.com
Hope you enjoyed this article.
Let’s toast to your health, wealth and happiness!