now the dreaded part... establishing a budget!
Do you ever wonder where your money goes each month?
Does it seem like you’re never able to get ahead? If so, you may want to establish a budget to help you keep track of how you spend your money and work towards making your financial dreams, REAL.
Examine your financial goals
Before you establish a budget, you should examine your financial goals. Start by making a list of your short-term goals (e.g., new car, vacation) and your long-term goals (e.g., your child’s college education, retirement). Next, ask yourself: How important is it for me to achieve this goal? How much will I need to save? Armed with a clear picture of your goals, you can work toward establishing a budget that can help you reach them.
Identify your current monthly income and expenses
To develop a budget that is appropriate for your lifestyle, you’ll need to identify your current monthly income and expenses. For ease, you can download an intellicents budgeting spreadsheet that we use with our financial planning clients here.
Start by adding up all of your income. In addition to your regular salary and wages, be sure to include other types of income, such as dividends, interest, child support and rent income you may get from buildings/land you own.
Next, add up all of your expenses. To see where you have a choice in your spending, it helps to divide them into two categories: essentials (e.g., needs like housing, food, transportation) and lifestyle expenses (e.g., wants like entertainment, vacations, hobbies). You’ll also want to make sure that you have identified any out-of-pattern expenses, such as holiday gifts, car maintenance, home repair, and so on. To make sure that you’re not forgetting anything, it may help to look through canceled checks, credit card bills, and other receipts from the past year. Finally, as you list your expenses, it is important to remember your financial goals. Whenever possible, treat your goals as expenses and contribute toward them regularly if you can!
Evaluate your budget
Once you’ve added up all of your income and expenses, compare the two totals. To get ahead, you should be spending less than you earn. If this is the case, you’re on the right track, and you need to look at how well you use your extra income. If you find yourself spending more than you earn, you’ll need to make some adjustments. Look at your expenses closely and cut down on your discretionary spending. And remember, if you do find yourself coming up short, that’s more common than you think! It will take determination and a little self-discipline, but you can always get help from your intellicents advisor if you want it.
Tips to help you stay on track
Involve the entire family: Agree on a budget up front and meet regularly to check your progress
Stay disciplined: Try to make budgeting a part of your daily routine
Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays)
Find a budgeting system that fits your needs (e.g., meeting with an intellicents advisor!)
Distinguish between expenses that are “wants” (e.g., designer shoes) and expenses that are “needs” (e.g., groceries)
Build rewards into your budget (e.g., eat out every other week)
Avoid using credit cards to pay for everyday expenses: It may seem like you’re spending less, but your credit card debt will continue to increase
You need to know where all your money is, and where it is all going. Even if it currently isn’t in the positive state you want it. It usually takes a while to get into good financial shape, but intellicents is here to help you with every step to get you there.
Want more on budgeting? Take a look at a short video that provides you more intellicents on this topic!
Visit your local intellicents office for in-person assistance or call 800-880-4015 to take your first step towards financial health.