Hi there, today I want to talk about budgeting, or your sending plan. We recently talked about how to vacation on a budget, so today I want to talk to you about how you even start a budget. One of the ways that most people manage their cash flow is, they get paid then they pay their bills they spend their money and if they have anything leftover, they may save or give or whatever those “extra” things are. Unfortunately, that’s kind of backwards because if you’re doing it that way a lot of times what happens is, as our income increases so too does our discretionary spending and so our savings never really catches up even though our paychecks may be going up.
The Better Way to Build Your Budget
- Identify your Current Spending and Cut Back – One of the ways that we really encourage people to begin budgeting is first go back, look 3/6 months back, and identify every single dollar. You need to understand how you’re spending money today because you can’t really build a budget unless you understand what your actual expenses are, otherwise, you’re just throwing mud at a wall and seeing what is really realistic or not. So, look and see, identify every single dollar know what you’re spending. Then figure out any specific things you can cut back.
- List your Fixed Expenses – As your building in your budget, when you’re looking at it, you should see your fixed expenses first those are going to come out. You got to pay your mortgage you got to pay your utilities, there’s certain things you have to pay.
- Savings (Emergency Fund, Vacations, etc.) /Giving – Then you’re going to build in things like savings, giving, maybe your vacation fund, whatever you want set money aside for or do on a regular basis.
- Discretionary Comes LAST – Lastly is your discretionary that’s where you can do the shopping and all of that kind of stuff. You may want to put shopping as part of your fixed expenses because if you have kids, they’re constantly needing new clothes, so I’m not saying that shopping can’t be in both spots some things will.
That is a good way to get started look back at your spending, understand how you’re spending money, then start to craft your budget from there. If you want more assistance with this please give us a call at 832-856-2825 or check out our website at www.nsfinancialtransitions.com. Thanks and have a great day!