The Exciting World of Budgets!

As we are approaching the end of another year, this is the time that I start to work on our budget for the next year.  Ever since my husband and I got married, I put a lot of thought and time into planning for how we will spend our money in the coming year.  We talk through any expected purchases we will be making and plan accordingly – such as a new car or finishing our basement. 

Most of us know how much money we make, whether it is our hourly wage or our annual salary.  Where a lot of people struggle is knowing where all that money goes by the end of the month.  And if you don’t have a budget and track your expenses, how would you know where all that money went?  You buy a coffee here, fill your car with gas there, buy cookies from the local girl scout, and make your loan payments.  It can be hard to keep track of everything.  And if you always make your payments and seem to find ways to pay for things, you may think there’s no reason you need to spend extra time keeping track of it all.  The problem, though, is that if you do not keep track of anything or have a plan for your money, you really won’t know your financial situation until it’s too late.  You’ll find out when you try to get a loan for a car or house and the bank turns you down.  Or worse yet, when your car breaks down or your house is damaged and you can’t pay to fix it.  Especially as we approach retirement, it is a good idea to sit down and really take a look at your budget to ensure all is well and on track. 

The basic steps for a budget include:

  1. Write down your income or take-home pay for the month.
  2. Write a list of your expenses for the month.
  3. If your income is greater than your expenses, congratulations!  The excess can go to additional savings or other expenses.
  4. If your expenses are greater than your income, figure out where you can cut back on your expenses.
  5. Now, track your spending for the month.
  6. At the end of the month, compare your actual spending with your budget. This is where you’ll notice all those coffees adding up! 
  7. Repeat for the next month.

I don’t expect you to get to the point that you’re as excited as I am to track your finances, but once you start to realize where all your money goes you will wonder why you weren’t tracking it sooner.  If you would like more ideas on how to start creating a budget, please give us a call.