Money Watch 8: Monthly Meeting

INDIANAPOLIS (WISH) - Controlling your finances is impossible without having a budget. It's a simple concept that few people actually follow.

In week 4 of Money Watch 8 Challenge: 60 Days to Change the three families participating in this process began the battle of their budgets. And, it wasn't always easy.

Imagine taking a driving vacation without knowing how much gas you have in your tank. You might make it to your destination without getting stranded somewhere, but even if you did, you probably wouldn't make it back. On the road of life, your budget gives you a clear view of your family's financial gas tank.

"No we don't said Joe. We don't have a budget," said Merita.

Joe and Merita have a 23-year-old son who lives at home with them. They've never had a budget.

"So far, I probably think at this point, we're probably breaking even without being able to save," said Merita.

But they don't really know. Neither does single mom, Nadia, nor parents Amy and Brent. So Peter Dunn, the financial expert behind 60 Days to Change told each of them to hold a monthly budget meeting.

"The goal of the budget meeting is to find a shortage or a surplus at the end of the month," said Dunn.

Dunn said preparing your budget should take about half an hour, once a month.

"You need your bank statement from the previous month and any other statement you spent money on. If you spent money on a Visa or MasterCard, have that statement printed out," said Dunn.

Dunn said use the spread sheet provided by 60 Days to Change or a simple piece of paper to record your total income for the month and every penny you've spent.

"Having a slight loss isn't a bad thing because let's say you already save $400 a month if you're down a $100 in your budget, it still nets out to a couple hundred bucks in savings," said Dunn.

Dunn recommends having a planned conversation about finances, rather than a random one.

"Where he thinks the money that he's put in, I should manage that and put the extra in the savings," said Amy. Brent said, "Well, I think there should be a surplus from the amount that I'm putting in there."

As Amy and Brent found out, those random budget conversations often lead to friction.

Amy said, "I think a lot of the accountability is on me, which I would love to start budget meetings and so hopefully he can understand where I come from also." "Yeah, well I go through the stress and everything at work and she can spend it," said Brent.

"You've got to have your budget meeting in the first five days of a new month," said Dunn.

The budget meeting is the road map to your financial destination.

"So it's not always about penny pinching, it’s about making adjustments on the fly within your budget. So if you knew you went over in March, you really have to watch it in April," said Dunn.

A map that will help Joe and Merita avoid a detour that could prove costly.

"Right now I think any miss-step is small, but there's such a grave consequence for us," said Merita.

That's because Merita found out her credit took a hit she didn't know about.

"Well, I found out we had cosigned. We, I had cosigned for my son for one of his student loans that is evidently coming due and is not being paid. So, that has hit my credit report and it doesn't look pretty so," said Merita.

Those surprises are why you need your credit report first, to figure out where you stand as you begin planning your budget.

Whatever your budget, Dunn recommends putting away some savings each month.

Next week, we'll show you how much money you need in your emergency fund. And why insurance is an important part of financial planning.

Click here to join the Money Watch 8 Challenge any time.