The first question I ask of any business owner is, “What is your overhead cost?” Most business owners know this answer. If you ask anyone off the street about his or her household overhead, I would receive a look of a blank confront.
What is your household overhead? The term “overhead” is used in business quite a bit. Overhead is the day-to-day cost and monthly/yearly cost of operating your household. You would be amazed at how many people do not know what it cost to “function” their house. They think they know until they truly put pencil to paper and write out every cost. They are usually very surprised how much money is truly wasted and where it all goes. And it goes pretty damn fast.
Just as business owners know their overhead the same should be for those who run a household. And we all function a household whether you are one person or a family of four. You must function your household like a business consequently you need to know how much it cost to function your house.
So let’s put paper to pencil. You need to know what you use on the following:
Groceries & Restaurant Purchases- This includes weekly grocery shopping, eating out at restaurants, take-out (pizza night, Chinese food night, etc), convenience stops at local grocer, WAWA, 7-11, course of action K, Starbucks, Dunkin Donuts, local bagel shop, etc.
– Monthly car payment
– Gas & Oil (Shopping for the cheapest gasoline for your car is not the best move. Sometimes a cheaper gas can cause problems for our cars and in turn cost you more in the long run).
– Oil Change (It is true you should change the oil every 3000 miles. It will make your car last longer).
– Repairs (You should save $20-25 per paycheck for repairs)
– Public Transportation
– Mortgage/Rent (If you are paying a mortgage, some folks take the advantage of bi-monthly payment. Bi-monthly payment method your mortgage company splits your monthly payment by two and they automatically withdraw the payment twice per month. This figures out to be one additional payment per year and in turn it could shorten the life of your 30-year mortgage loan to 21-22 years. Some folks do not want to give their mortgage company anymore than due and they would rather invest the money in stocks, CD’s, etc.)
– character Taxes
– Utilities (Electric, Water, Sewer, Gas, Trash)
– Telephone (Many people are considering dropping their land-line. This might be a good idea. If you are not in business for yourself however (and hopefully you will be soon) why have more than one telephone.
– Gifts given
– Allowance for children
– Revolving charges, i.e. department store charges
– Student loan payments
– Health (Add this to your budget already if your employer automatically deducts from your paycheck)
– Mortgage Insurance (PMI-Private Mortgage Insurance)
– Renters Insurance (I always recommend purchasing renters insurance. It is very affordable.)
– Long-term healthcare
– Concerts/Movies/DVD Rentals
– Cable TV
– Medical co-pays/co-insurance
– Bank charges
– Educational Costs
– Any other expenses
– Personal savings
– Stocks/Bonds/Mutual Funds
Now that you have a budget outline you should complete this form over a 3-month period. The reason for a 3-month period is because a one-month snapshot is not long enough for a proper examination.
After your 3-month examination you will be able to see where you use your money and the cost for operating your household and lifestyle, hence your personal lifestyle overhead. Armed with this information you will be able to make changes and hopefully begin to save more and use wiser.
Please keep in mind just as in business life changes. Sometimes the change is slow (paying off your school loan) or sometimes fast (becoming ill and needing your appendix out closest). One should prepare for these changes to the best of their ability and one way is saving money in your bank, envelope, jar, etc. for the life’s little “Uh-oh’s”.
It is easier than you think to keep/analyze your overhead. There are many computer programs that will do this for you. One such program is Quicken. There are many others. It will make your life much easier (and your accountant’s). You can learn more at www.frompaintopersonalgain.com
I hope you enjoyed this article.
Here’s to your Health, Wealth & Happiness!