Tuesday, May 4, 2010

Budgeting for pension cut- Summary

We are facing a cut in our Nortel Canadian pensions starting October this year. The cut may be around 40% and we need to be prepared to manage that reduction in income. To help do that I plan to write a few posts that give the essence of my budgeting method and how I will handle a reduction in income.

This first post in the series is a summary of what I plan to write about in terms of my budget process.

To work out a reasonable budget plan you will have to do some research on your spending and savings habits, and start building some records. As well I suggest that you keep a record on a monthly basis of the various accounts and expenses that you incur.

Budgeting has two basic aspects to it. Income and expenses. Balancing those two is the goal.

Additionally it is really worth while understanding how much money you have in various accounts, and keeping track to make sure you don't deplete them too quickly.

This whole process is similar to financial statements of a business and you should treat your own situation in the same manner.

It doesn't have to be onerous however, with lots of accounting jargon and gimmickry.

Hence the following sessions I will write about each of the following in turn:

1. Income sources
2. Taxes
3. Expenses
4. Savings
5. Bill records
6. Liquid accounts
7. Tax deferred accounts
8. Investments
9. Expense reduction decisions
10. Record keeping

I usually keep records on excel spread sheets and that helps understand the trends that I am facing as I review my position each month.

I hope you will find this useful as we all prepare for this traumatic cut.

1 comment:

  1. The pension funds for teachers, police, firefighters, state troopers and other government workers are crunching the numbers on how various changes would help keep the five funds solvent.