Earlier this week, we talked about how to turn easily-breakable resolutions into achievable goals for 2016. Today, let’s take a look at one of the most popular (and helpful) goals people focus on at the start of a new year: Creating a Budget.
Most of us have a bunch of fixed expenses that we deal with each month: mortgage or rent, car payment(s), insurance, utilities…those are a good place to start when we work on a budget, because there’s not much we can do to change them.
Then there are categories where we have a little more wiggle room: food, toiletries, entertainment, gifts, clothing, etc. If money’s really tight, we have to make some serious choices in these categories. “Entertainment” might consist of a $7/month Netflix payment rather than a $70 date night. Your monthly clothing budget might be a small cash contribution to a “clothing fund” envelope rather than a Kohl’s run. It’s time to get intentional about savings goals, and make your budget reflect those goals.
Your most important budget goal is to make sure that the money going out is less than the money coming in. The second goal is to make sure it’s do-able…if you’re able, allow yourself and your spouse a little “pocket money” for incidentals…a pack of gum, a cup of coffee, a quick lunch stop, whatever it may be. But also have the clear understanding that when that money’s gone, it’s gone–no more treats till the next month.
A budget doesn’t have to be set in stone; in fact, it’s probably most useful when it’s evaluated and revised as necessary. But a good budget helps you keep non-essential spending in check, and also sets aside a little each month for budget-busters like car repairs, gift-giving, buying clothes, medical bills, and more.
Ideally, a budget also provides for some savings, both building a fund for emergencies, and preparing for things like the kids’ college and your retirement. If you’re focusing on paying off debt, that’s the first destination for any extra money once you have an emergency fund in place. Hopefully creating and sticking to a budget will also help keep you from adding any more to your debt as well.
To review:
- Calculate your monthly income.
- List all monthly fixed expenses. For annual, bi-annual, or quarterly payments (like insurance), divide to find the monthly expense.
- List all monthly variable expenses. Be thorough–look through credit and debit card statements to catch everything.
- Are your expenses less than your income? Are your figures reasonable?
- Plan for occasional expenses by setting aside monthly amounts for car maintenance, vacation, Christmas spending, etc.
- Look for places to cut expenses so you can add more to savings.
- If you haven’t already, work to create an emergency fund so unexpected expenses don’t break the budget.
- Be disciplined–work as a team to reach your goals. Your financial security is worth it!
Here’s a link to a post with some awesome financial planning and budget printables, which I hope you find useful. Getting everything written down in an organized way is a big step in helping get control of your finances. Continue tracking your spending, so that you have a number to put in the “actual” column beside your budgeted amount. This will help you see where you might need to adjust your budget, or more importantly, where you need to adjust your spending habits so you can stick to your budget.
Our Frugal Friday series is full of great time-tested tips to help you create and stick to a budget. You can check them out every Friday throughout the new year! Remember: you are in control of your money–make it do what you want it to do!
