How to Budget With Multiple Running Balances

Juggling multiple running balances doesn't have to be stressful.

Budgeting with multiple running balances may seem like an intimidating task to the financial layperson. However, running balances are quite common and take the form of month-to-month credit card balances, car payments and mortgages that are a common part of the American lifestyle. The best approach for dealing with the problem is to maintain minimum obligations and at the end of the month use whatever surplus is available for debt reduction.

Things You'll Need

• Pen and notepad
• Comprehensive financial records
• Basic calculator

Instructions

1. Write a list of all the running balances for the household or business. Include the debt totals, the minimum monthly payments and record any notes relating to advanced repayment -- in other words, paying back the debt sooner than scheduled. Some loans do not allow for early repayment or charge penalties to ensure that the expected profit margin on the loan is maintained.

2. Write a list of fixed monthly expenses. In a household setting these include rent or a mortgage, utilities, groceries and other necessities. In businesses, fixed expenses may include raw materials, payroll, a lease and building maintenance as well as utilities.

3. Calculate total inbound monthly revenue based on income of contributing family members, or in the case of a business, make an estimate based of the average of the revenue reports from the past year.

4. Add the total from the list of fixed expenses to the minimum payments for the running debt balances to determine total monthly financial obligations.

5. Subtract the total monthly obligation amount from the monthly inbound revenue estimate. If there is a deficit, it is necessary to make cutbacks from the fixed-expense category, which may require downsizing either a workforce or a home, in a business or family context respectively.

Tips & Warnings

• If the terms of a loan offer a benefit for early repayment, then allocate a percentage of each month's surplus revenue toward debt repayment.

• Running a revenue deficit is a sure path towards financial disaster; it is critical both on the home and business levels to make major changes quickly to prevent bankruptcy.

References

• Microsoft Office: Calculate a Running Balance
• Directgov: Budgeting