Budgeting Basics
Everyone Should Know


If you're looking to gain more control over your spending and begin working towards your financial goals, you should strongly consider following a budget. While the word budget can be intimidating and is often associated with limited spending, you should really look at a budget as a way to being more efficient with your money. Whether you’re living paycheck to paycheck or are making six-figures, you should know exactly where all of your money is going each month to ensure you have a handle on your finances.

Creating Your Budget

Creating a budget can help you reach your financial goals, but can also keep you and your finances in shape.

Fixed expenses being those that relatively stay the same each month, while variable expenses will fluctuate each month. This section of the budget sheet will be important when it comes to revisiting your budget and making any necessary adjustments. If you determine you’re spending more than you’re making each month, it’s time to make some changes.

Finding the Right Budget for You & Your Finances

Whether you’re using pen and paper, a spreadsheet or an App on your phone, your end goals should still remain the same. Some follow the 50/30/20 budget method where you account for 50% of your income towards needs, 30% towards wants and 20% towards savings. Consider automating your savings with automatic transfers. If not, make sure the first thing you’re doing with each check is paying yourself, by putting that money into your savings account. It’s crucial that when you’re setting up that 20% savings, that you’re dedicating money towards both the short term and long term. Don’t get discouraged if a particular method doesn’t work for you, budgets are all unique, so it’s up to you to find out what works best. Leave yourself some wiggle room each month, so you’re not scrambling to come up with money for any unexpected expenses forcing you to use your credit card.

Account for All Expenses

While you probably have already accounted for monthly expenses such as housing, car payments and utilities, are you accounting for those ancillary expenses that may not come to the forefront when building your monthly budget? While they may not be top of mind, it’s important to leave room in your budget for yearly and ongoing expenses such as license plate renewal, annual fees, birthdays, graduation parties, weddings and more.

If you use credit cards on regular basis and carry a balance, don’t forget to account for your monthly payment. Ideally, it’s better to pay more than the minimum due, and your budget should be flexible enough to accommodate this.

Speaking of credit cards, creating a budget is a great time to review past credit card statements to see how you are using credit to cover basic expenses and how you might develop a budget to break your reliance on them.

Staying on Track

So, you’ve finally taken the time to create a budget, now it’s time to make sure you follow it. Budgeting can be like going on a diet; you start with good intentions, but after a few weeks or months you drift away from your plan and find yourself repeating old habits. Drifting away from your budget can lead to overspending and using credit cards with high-interest rates. One way to stay on track? Review your budget monthly to see where you stand, as fixes may be necessary. Whether it’s a change in your spending, your income or a series of unplanned expenses, reviewing and adjusting will ensure your budget stays intact.

Importance of a Budget

On the surface it may seem like creating a budget is just another tedious financial exercise, especially if you feel like your finances are already in order. Instead of viewing a budget as a negative, you should view it as an extremely helpful and useful tool. You might be surprised at just how valuable creating and following a budget can be. Most importantly, don’t forget to leave room in there for some fun!

No matter the budget method you choose, it’s important to be ready to adapt, as your income, expenses and priorities will change over time. You should also be prepared for any unexpected cost you may encounter along the way. Just don’t be so hard on yourself if and when you mess up in a month. Whether you’re focused on getting out of debt, are saving for a home or are working towards retirement, having a budget in place will help you reach those goals. If you have questions or would like to schedule an appointment for a free loan review, stop in to any of our branches or follow the link below.

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