Budgeting

September 11, 2018
budget graphic

Budget. The 6-letter dirty word. After the series of blog posts on debt, I figured I should talk about budgeting, even though, if you’re like most people, you’re not interested.

A Gallup poll showed that less than 1/3 of Americans (32%) actually keep a formal budget, and that you are most likely to have a budget if you make at least $75k/year.

When I searched on Google to get ideas on what to talk about for budgeting, there were literally 173,000,000 results. Most people know that one of the keys to managing your finances is to get an accurate picture of what you spend. Tracking your income and expenses can help with that. When you want to lose weight, “they” tell you to keep a food diary, right? Same thing with money—when you want to spend less, you may want to keep a money diary, and figure out what you are spending money on.

Budgeting is uniquely personal and largely depends on your priorities. What is important to you? Do you feel that you should eat only high-quality organic food that you prepare at home? Then, perhaps your food budget will be higher than someone else’s. Do you have kids? Your budget will look different from a single person’s. However, I think you should try to create a buffer in your budget for unexpected things that pop up, so you don’t have to rely on emergency savings all the time or a credit card. If you budget away all of your funds, there will be nothing left in case of emergency.

So, how do you budget? Here are some easy ways to start:

  • Figure out how much money you make each month, after taxes and withholdings, etc.
  • Pay yourself first---make saving a priority and automate your 401(k) or retirement contributions, and don’t forget the regular savings! To automate, simply have your employer put a set amount of money directly into a savings or retirement account via direct deposit. You don’t touch it, it just magically happens.
  • Next take care of your necessities: Rent/Mortgage, Utilities (this does NOT include Netflix or cable—that’s a want), Transportation (again—you have to get around but having a new car is a want), Food, Healthcare, and Childcare.
  • Build in your debt payments from student loans, credit cards, etc. and try to pay those off ASAP
  • Budget for everything else, including annual expenses you might forget about. For example—car insurance. If you pay your car insurance every 6 months instead of monthly to try and get a discount, then divide that semi-annual premium by 6 to come up with your monthly budget amount. This will help you set that aside and not have to worry about coming up with a big chunk of cash every 6 months.

Ok, so you did that, and you have a negative amount at the end, as in, your expenses exceed your income. Booooo! That’s when it’s time to start trimming.

  • Are there “wants” that you can temporarily forego until you get yourself back on track and in the black?
  • Can you increase your income in some way---sell things, take on a side job?

One of the tips I found when researching this post was to “make it fun!” Get some snacks, put on some music, and have a budget date night! Isn’t that super fun! Um, no. I’m not going to sugarcoat it, budgeting really isn’t fun, even to someone like me, who is a geek about money things. But it’s a necessary evil sometimes.

There are about a zillion budgeting and financial tools out there to help you do this. Apps like Mint, Personal Capital, Mvelopes, You Need a Budget, Wally, and Albert are a few that come to my mind. Some tools are free and some may require a fee to upgrade to the “premium” service which you may not need anyway. Really, the best tip I can give is this:

  • Pick something (app, website, Excel spreadsheet or plain old pen and paper)
  • Actually use it
  • Monitor and review after 30 days
  • Repeat

Happy budgeting!

Any opinions are those of Jill Carr and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

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