a) General Ledger
This segment should account for the monetary accrual of all the following
segments.
b) Groceries
This segment should show where you purchased, the amount spent, and
the balance left in the account.
c) Heat
This segment should reflect the monthly amount spent, and the balance
left in the account. You should arrange with the gas, oil or electric company
to give you a "budget" plan for year-round automatic monthly debits from
your bank account. This facilitates budgeting.
d) Light
Same as heat above.
e) Home Insurance
Ask your insurance Agent if he/she will accept automatic payment withdrawals
out of your account. You can get the name of an Agent from your Realtor.
f) Life Insurance
You should carry Term Life Insurance for the amount of the mortgage
to protect all parties. You can obtain this insurance from an independent
insurance broker or the lending institution.
g) Car Insurance
Having car insurance payments come out of the household account prevents
you from scrambling once a year to come up with the appropriate amount.
Again, you should ask your Agent to withdraw monthly the payments from
your account.
h) Water
If you are on city water, the household account should have a segment
for payments.
i) Miscellaneous
This section is for unexpected debits within your household (ie rugs
cleaned, driveway sealed, cablevision, painting etc). It should amount
to 10% of all the other segments.
j) Property Taxes
Even though Municipalities only want their money three or four times
per year, we don't always have the money required to pay. If you were to
accumulate the money monthly, you don't have to go looking when the bill
arrives.
k) Mortgage Payment
This segment should show the principal and interest portion of the payment, as well as any accumulation you want to make to prepay your mortgage on the anniversary date. In other words, if your monthly payment is $1,000 but you would like to prepay an extra $1200 per year (which is $100 per month), you would transfer from the general ledger $1100 every month but show only $1000 going to the mortgage company. At the end of the year, you have accumulated that extra money so you write a separate cheque to your mortgagee.
If you buy or own a Condo, you can add a section for the condo fees.
l) Other Instalment Debts
You can further breakdown this section to individual requirements, such
as child support, car loan, boat loan etc. Each loan should show the payment,
the amount of interest payable, the amount of principal paid and the balance
outstanding. When one loan is paid, you then increase the payment on another
and so on.
m) Savings Plan
This is probably the most important segment of all. You should pick
an amount you wish to salt away for a rainy day, and consistently deposit
it to this segment each month. This could be your holiday account, christmas
shopping account, or retirement account. The amount deposited to this account
should be 5% of the total of all the above segments.
Once a month you deposit the total of all the segments into the general
ledger, and then transfer from this ledger into all the separate sections.
The reason you want to do it by section is that it will allow you to analyze
to a greater degree of accuracy how much more or less has to be set aside
to make ends meet. When you buy your first property, you should have enough
saved up to make an initial deposit equivalent to the total of all the
segments. In other words, you will be prepaid by one whole month for all
your debts, that in itself can save you sleepless nights.