Last year I wrote a series on financial planning.

Last year I wrote a series on financial planning. The single most important document in the financial planning process is the family budget.
It is the starting point for the entire process. You have to know how much you're taking in and spending each month before you can have a plan.
Unfortunately, the vast majority of folks out there do not have a formal budget.

When I have people put a pencil to their monthly budget, they are generally surprised at how much they really spend each month. It adds up fast, especially on the little things like eating out, tobacco products and entertainment.

If you want to maximize your retirement savings or your family is struggling because you have a lot of debt, you must start a family budget.
The first time you sit down to work on your budget, it is a little bit time-consuming but once you get it on paper it's pretty easy to maintain.
The best source for all your expenses is your checkbook. To obtain a worksheet, you can go online or you can email me to get a copy. Typically a budget is prepared on a monthly and/or annual basis. I think you will find the monthly budget is more practical.

The budget should include major expenses such as your rent or house payment, auto payment, property taxes, total monthly gas bills for the car(s), utilities, groceries, insurance premiums, credit card payments, childcare costs, estimated auto repairs, household repairs, clothing purchases, your fund money, and most importantly your savings.
Savings. There's an old saying that you should pay yourself before you pay the rest of your bills.
That means that your savings comes right off the top. You should try to save about 10 percent of your paycheck however, most Americans say far less.

Sadly, many families spend more than they make and don't even realize it.
Why? Because they don't have a budget.
House payments. Your house payment should generally not exceed 30 percent of your net income.
At that level it's manageable. When your house payment starts to consume 40 to 50 percent of your net income, it leaves very little money to handle all the other expenses that you have to handle. Also, when you're spending so much of your income on house payments; it leaves nothing for you to save any money.

In 2008 we saw that housing prices can go down as well as up; just like all other markets. So, don't bet your future on the assumption that your home equity will provide a cash cow to fund your retirement by plowing all your excess cash into your home.
Credit Cards. We all want the American dream; unfortunately too many people want it right now and use credit cards improperly to get it.
Within a short time, folks get over their head in credit card debt and can't find a way out. The rule of thumb here is that you try not to charge more than you can pay off in the next month. Credit cards carry high interest charges. Credit card companies are only too happy to extend credit to young people and they really don't care if they get over their head in debt. Debit cards are safer because you have to have funds in the bank to use them.

However, you have to be careful because the transaction fees on debit cards are higher.
A lot of younger people today use debit cards for all their daily transactions.
What they don't realize is they are paying a fee on top of each and every transaction.

Having a family budget helps you keep tabs on your monthly expenses.
A family budget is not a document that you prepare once and then throw it in the desk drawer. It is something that you update and track each and every month.
If you purchase a big item that exceeds your budget that you know you must reduce expenses and another area to compensate for it.

Larry Martin is an Investment Advisor Representative offering advisory services through Mader & Shannon Wealth Management, Inc (MSWM). 4505 Madison Ave., Kansas City, MO., 64111.