DO I REALLY NEED A BUDGET?
Reaching the end of the month and then wondering were the money went can be one of the most frustrating experiences. This doesn’t have to be your situation. Setting up a monthly and yearly budget is really much easier than most think. When you have a budget, instead of your money going out in an uncontroled manner, you are the one telling your money where to go.
Setting up your own budget doesn’t require major effort. In fact, it’s really very easy.
Step 1 - Write down what your total income is from all sources.
When we talk about income here, we are talking about your total take-home (after tax) pay for both you and, if you're married, your spouse. It’s important that you don’t forget to include everything, that is all your income from full-time jobs, second jobs, freelance pay, Social Security checks, and any other ongoing sources of income.
Step 2 - You will need to list all your expenses.
Of course there are your regular bills (mortgage, electricity, etc.) but you also probably have irregular bills (for example: quarterly payments like insurance or HOA) that are due for the upcoming month. After that, total your other costs, like food, gas, and entertainment. You need to make sue that very dollar you spend is accounted for.
Step 3 - You will be subtracting your expenses from income.
Assuming you haven’t forgotten any Income or Expenses, you will come up with either a positive or negative number. In either event, be sure to review both you list of Income & Expenses to make sure you haven’t forgotten anything.
If find that your income is still greater than your expenses – great – it will make Step 4 easier.
Step 4 – You are going to begin tracking your expenses throughout the month.
Believe me, even though you now have a budget, you are going to need to stay on top of your expenses. It can be surprising just how quickly your spending can get out of control if you are not staying on top of it.
What if you find that your Expenses are greater than your Income?
This is where the work begins. You are going to have to examine each expense and find solutions as to how you can decrease them. Some expense like auto & health insurance premiums or your mortgage or rent payment for example are going to be fixed and there is probably very little you can do to change them. At least starting out.
To begin with, you are going to want to place your focus on those expenses you have the greatest control over. Determine which one are eating up possibly more of your income than they should. Go after these expenses first and then look for way to reduce your other expenses. The good news is that this really can be done. It just take a little time and work.
Our clients receive the financial information they need to make good decisions about this process. Our clients also have us there to help them if they need it.
