9.1.2: Planning a Budget

A budget involves planning for expenses within the limits of the amount of income (money coming in). People often find it helpful to set up categories of expenses when planning their budget. The first step is to determine all the household expenses. The second step is to determine all sources of income. Then, once all the data has been collected, a person will be able to determine if the monthly income meets, exceeds, or is less than the monthly household expenses. We will take a look at how to determine expenses and income next. A Household Budgeting Worksheet can be downloaded and copied for personal use from American Consumer Credit Counseling at: http://www.consumercredit.com/media/11393/household_budgeting_worksheet_2013.pdf

Determining Expenses

The next step in effectively managing money is to determine what the actual expenses of the household are. Actual expenses are expenses the patient and family have. These include rent or mortgage payments, car payments, car or health insurance payments, groceries, gas and electric bills, water bills, tuition for school, prescription medication costs, gas for the car, and clothing. Depending on the patient and their family’s unique needs, types of expenses will vary. Home Health Aides/Personal Care Aides should discuss with their patient the expenses they have in order to best help them develop a budget.

Remember; never be judgmental in how a patient spends their money. People choose to spend their money in very different ways. Home Health Aides/Personal Care Aides may not agree with the way their patient spends their money, just like the patient may not agree with how a HHA/PCA spends their own money. Remember, it is the patient’s money, just like a paycheck is the HHA/PCA’s money. The job of the Home Health Aide/Personal Care Aide is to assist the patient and family with being able to plan effectively so as to reduce their stress about money, and to live independently and according to their income restrictions and preferences.

Home Health Aides/Personal Care Aides can determine expenditures (expenses) by writing down the cost of all the family’s living expenses. They could do this in a spreadsheet, a word document, or on a piece of paper with categories. Once they have figured out all the categories of expenses and how much each costs the family on a monthly basis, they should then add up the total expenses.

A sample expenditure sheet may look like this:

Expenditure Worksheet

Expenditure	Cost
Rent or mortgage
Automobile payment
Automobile insurance
Health and dental insurance
Homeowner’s/renter’s insurance
Life/disability insurance
Child support/alimony
Food
Electricity
Gas
Water
Garbage
Education (tuition, supplies)
Prescription medications
Cleaning supplies
Clothing
Household items
Personal care (hair, nails)
Health club membership
Club memberships and dues
Entertainment
Subscriptions
Total Monthly Expenses	Total:

Determining Income

Once Home Health Aides/Personal Care Aides have figured out the expenses, they need to determine the amount of income the household has. Determining income is done by writing down all the sources of income and the amount of income from each source. An example of what this might look like is this:

Monthly Income Worksheet

Income Source	Amount of Income
Salary/wages (self)
Salary/wages (spouse, significant other)
Social security
Unemployment
Child support/alimony
Financial aid/scholarships
Pension plan/retirement
Food stamps
Public/government assistance
Total Monthly Income	Total:

Now that they have figured out expenses and amount of income for the month, they need to figure out the balance left after expenses. To do this, subtract the Total Monthly Expenses from Total Monthly Income. This is the amount leftover. They may find that the Total Monthly Expenses exceeds (is more than) the Total Monthly Income. In this case, they will need to assist the family to determine where expenses can be eliminated (removed). In other cases, the Total Monthly Expenses is less than the Total Monthly Income. In this case, the family has extra money beyond their expenses.

Let’s look at some examples of how to do this.

Example:

Total Monthly Income: $5,300

(-) Total Monthly Expenses: $4, 750

__________________________________________

Amount leftover: $550

In the previous case, there is $550 leftover after accounting for all the monthly expenses. This means the family has more income than expenses. Families can decide to put this money into savings in order to build up retirement savings, pay for future college expenses, save for a more expensive item, or to save for an unexpected cost.

Example:

Total Monthly Income: $6,250

(-) Total Monthly Expenses: $7,500

__________________________________________

Amount leftover: -$1250

In the previous case, the family is spending $1250 more than what their income is. Their expenses exceed their monthly income. They will need to make adjustments to their spending in order to live within their means.

Self Check Activity \(\PageIndex{1}\)

In the following example, does the family have enough income to meet their expenses?

Total Monthly Income: $3,500

(-) Total Monthly Expenses: $3,750

__________________________________________

Amount leftover: -$250

a). Yes

b). No

Answer

1. B=NO

FEEDBACK:

The amount leftover after subtracting monthly expenses from monthly income is negative, or less than what is needed. Adjustments to spending will need to be made in order to live within this person’s means.