The Basics of a Budget

I think that a budget is one of the most basic and useful skills in managing your personal finances. It is a great planning tool.

Basically, you prepare two sections, with four columns each. For the heading of each column, you have "Description", "Amount", "Frequency", and "Period". For now, we will only fill in the first three columns for each section.

The first section is for income. It is the easiest one to fill. You write down all the amounts you expect to receive for the next year. This can be from your salary, dividend payments, whatever. For each amount, write down the frequency (for example, if your salary is a net $800 a week, while you receive $50 in dividends every quarter, write these down). If your income varies with time (for example, if you receive commission income that changes every week), use an average.

The second section is for expenses. That list can be quite long -- grocery, rent, car payments, phone, internet, insurance, clothes. Try to list everything, and include the frequency along with each amount. One good way to structure the expenses section is to use broad categories. For example, this could be:

• Home (rent or mortage, electricity, heating, taxes, insurance)
• Transportation (car payment, gas, bus tickets, driving license)
• Living expenses (grocery, phone, clothes, internet)
• Leisure (cinema, eating out, books)
• Others (student loan payment, life insurance, yearly credit card fees)

Once you've written down all the income and expenses you can think of, along with the frequency for each, it's time to bring them down to the same period of time. This can be a week, a pay period, or a month. Use whichever one is most convenient for you.

Now, for each item on your budget, calculate the amount of each item for one period of time. That's what the "Period" column is for. So, if your period of one month, your salary is $800 a week, and you receive quarterly dividends of $50, you would put down $3400 and $16.66, respectively (since a year has 52 week, each month is actually 4.25 weeks).

Calculate the total of the "Period" column for each section. Compare them. Are you spending more than you make? Even if you don't, there should be a margin of safety between your income and your expenses -- after all, we always forget to include something in the list of expenses.

More on budgets next time!

Getting Started, part 2

Before I get into the financial stuff, I thought I'd introduce myself.

I am 37, male, and a computer analyst. I currently work for a big consulting company in Quebec.

My spouse (whom I call Princess in this blog) is a few years older than I am. She works for the provincial government and has three children, all young adults. Two of those live with us.

A couple of years ago, we bought a 40-year old house. It is in good condition, but still needs a fair amount of maintenance and renovations. We handle most of the work ourselves, as we are lucky enough to have the skills.

Why did I choose the name 'Frog of Finance'? Because I'm a French Canadian and proud of it. And frogs are cute. It's also a play on the word 'Frog' vs 'Fog', since finances are so often murky and difficult to navigate.

Finally, I believe that handling my own finances can be fun, so expect a few jokes along the way!

Getting Started, part 1

How does one get started blogging about finance?

I have been reading financial stuff for about a year now. This includes a few books, but for the most part my information has been from web sites and online articles. A couple of months ago, I stumbled upon blogs that talk about finances and investing.

One of those left a deep impression on me. It made me think about what I have learned. Made me realize that writing about my thoughts, and receiving comments, could help me refine my financial strategy.

That blog is A Canadian and Her Money.

So thank you, The Money Diva, for inspiring this Frog!

Once Upon A Time...

... there was a young frog. Its life was a simple one -- the frog had a good job in its little pond, played with its friends, and visited its parents as often as it could.

Our frog had a little bit of money, which it decided to invest. At first it was clumsy -- it had some success, but made quite a few mistakes listening to poor advice. It learned why some called investing a jungle, although our little frog liked to call it a swamp. Life continued, the good but also the bad, as our frog lived through some hard times.

Then one day the frog got very lucky, and met a beautiful princess. They decided to live together, and were happy. But the frog knew that a day would come, as years went by, when its legs would loose their spring and work would become impossible. When such a time came, it wanted to be ready.

So it decided to learn more about finance, and that strange swamp that is investing. It read a lot, tried some things, read some more, and experimented. Then, one day, it stumbled upon the strange library of Blog, where it read about others also trying to navigate the swamp.

Discovering their story, the frog decided to share its own...