Budgeting Basics

by | Jul 6, 2023 | Personal Finance, Taxes | 0 comments

During inflationary periods, it is harder to balance your income with the rising cost of things such as housing, food, fuel, health care and insurance. One of the best tools to monitor increasing costs is creating a budget and measuring it throughout the year. Here are some suggestions to help create a budget that actually works.

  • Keep it simple. It’s not necessary to have 50 different expense categories to classify your transactions. Having a simple budget makes it more likely that you stick with it over the long term. So take a look at your bank account and identify the big things. Revenue is pretty straight forward. Expenses are more difficult, so identify the main categories and get an accurate monthly read on them.
  • Create annually, but manage monthly. See the full year budget as a destination, and your monthly financials as a journey to that destination. That way if you have a bump in the road, you will see other pathways to get to where you want to be at the end of the year. When you are done here, you should have a monthly budget, with annual goals.
  • Remember to budget for savings. Try to pay yourself first.  Consider adding a percent of your income in your budget for saving and investing. You may need to find ways to increase your income or decrease your expenses to make this happen but this will help you build your net worth over time and help fund for emergencies.
  • Account for taxes. Paying your tax bill may be one of your biggest expenses every year. Schedule a tax planning session during the year to figure out how much you should be saving every month to pay your federal, state and local tax bills. Then put this dollar amount in your monthly budget.
  • Remember to have fun. Having a budget doesn’t mean you can’t spend money. It simply means that you’re intentional about it by planning your spending before it happens and ensuring it is not out of hand.