LET BUDGET BE TOOL YOU CONTROL TO GUIDE YOU TO YOUR GOAL

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, January 13, 1992                   TAG: 9201130031
SECTION: BUSINESS                    PAGE: A-7   EDITION: METRO 
SOURCE: MAG POFF BUSINESS WRITER
DATELINE:                                 LENGTH: Medium
LET BUDGET BE TOOL YOU CONTROL TO GUIDE YOU TO YOUR GOAL
Penciling in your figures for the family budget is the final step in grabbing control of your own finances.
The budget is your guide; a road map, if you will, for reaching your goals. But first, you have to know where you want to go.
"People don't plan for their goals," according to Irene Leech, family finance specialist at the Virginia Tech Cooperative Extension Service in Blacksburg.
That covers short-term objectives, such as a vacation or new wheels, and long-term commitments like a college fund or retirement.
People should write down their goals or, at least, verbalize them, Leech said. They must also make a realistic estimate of the money it will take to pay for them - a step that could force redefining the goals themselves or the date when they can be achieved.
Most people think a budget is a strait-jacket, Leech said, but that isn't the case. A budget, she explained, is "a tool you control, not something that controls you."
Leech said a budget is not a financial device that all people need at all times. But every family should write down and follow a budget at some times, she said. People who usually handle their money well should draw a budget periodically.
Leech outlined seven steps for gaining control over family finances.

Get organized. Pull together all of your bills and financial papers in one place, and sort them.

Determine your goals. Write down what you want to accomplish both near and long term. Estimate the amount you must raise for each.

Look at the resources available to help you reach those goals. In addition to total family income, that covers resources available within the community such as free recreation or, in the case of college tuition, student loan programs. Perhaps your employer will match contributions to a 401(k) type of retirement plan.

Calculate your net worth. List all of your assets and liabilities, then subtract one from the other. Assuming the assets are larger, the difference is your net worth.

Estimate the amount of money the family will earn this year from all sources.

Write down all of your financial obligations that are fixed and cannot be changed. That includes items such as rent or mortgage payments, insurance premiums, taxes and car payments. You do have some control over the cost of food and complete discretion over spending on gifts and recreation.

Make a plan for the year's spending. Use the form on this page to determine the amount of your fixed obligations, to set aside an amount for savings, and to impose limits on discretionary spending. To reach specific goals, you may have to reduce or eliminate the variable expenses.
Leech said the budget should be revised from time to time to reflect changing circumstances.
The Virginia Society of Certified Public Accountants recommends setting an annual savings goal of 10 percent of family income.
The money should go first into an emergency fund, according to the society. "In these uncertain economic times, it's more important than ever before to establish an emergency fund.
The ideal is to sock away the equivalent of at least three months' living expenses. Put this money aside in accessible investment vehicles, such as bank money market accounts or mutual funds."
The society said the first of the year also is a good time to review health insurance and policies for homeowners or renters.
The homeowner's insurance should match the rising value of your home. The society said your house should be insured for 80 percent of full replacement cost. That's the cost of labor and materials to rebuild the house or any part of it. But homeowners should be cautious of policies that over-insure furnishings, garages, tool sheds and other buildings or include the value of land.
Take an inventory of your personal possessions to be sure you have adequate coverage.
The society said most policies provide half of the basic coverage for loss of personal property. If a home is insured for $100,000, for instance, possessions are usually covered for $500,000 unless a higher amount is requested.
"But don't automatically assume that his amount is correct," the society said. Check with the insurance agent about limits and exclusions.

by Archana Subramaniam by CNB