For most people the cost of managing how they live their life is more important than managing their investments. The fact is, without any type of savings the returns that you’re going to get aren’t likely to be anywhere near sufficient or close to your goals. The solution: Creating a budget and using it. Frankly, it’s one that most people dread hearing about but if the surest way to control spending, set realistic goals and secure your financial future. Figuring out your average household expenses and thus your average family budget is critical.
Below we have a series of questions from real clients and we’re going to give you our answers to those questions. Hopefully this will help you to realize just how important the budget is and spur you to either create your own or talk to your financial professional to help you get one created. Enjoy.
Q 1: How do I get started with a budget?
Just like with anything else in life, you need to know where you are before you have the information you need to go someplace else. The best way to do this is to start keeping track of all of your expenses. And by all, we really mean ALL of your expenses. Big or small, if you can follow your expenses for at least a month you’ll get a “snapshot” of how much you’re spending every month, information that will give you a basis for your new budget.
Q 2: What is the best way to stick to a budget?
The best way to stick to anything, including a budget, is to intentionally monitor what you’re doing, either on paper or with the help of a computer program or app, and keep doing it until it becomes a way of life. That’s the only way to really change your behavior and to help you “stick to” your budget.
Q 3: What tools are available to help me budget?
There are many websites online including Mint.com and Youneedabudget.com where you can easily set up a membership that will set boundaries for your spending, send you email alerts if you go over them and help you determine what kind of trade-offs you can easily make. There are of course our programs like Microsoft Excel and other budget programs that you can purchase but the most important thing is to find one, no matter what it is, and use it.
Q 4: How do I budget for a large purchase?
First off, having a budget in place will help you to do this much more easily. Secondly, whether it’s an automobile, new home or college fund, you need to first determine what’s realistic. If, for example, you want to put aside $10,000 as a deposit on a new home, you need to determine how much you can put away per month in order to reach that goal and then, of course, get started. In other words, you need a plan and your budget will help you to put that plan into action.
Q 5: What can I do to keep from being overwhelmed by my budget?
The truth is that many people feel “handcuffed” by their budget, especially if it’s too strict. If someone isn’t happy with their budget they will easily stray from it or trash it completely. With that in mind, budgeting a little “splurge money” every month is a great idea to allow you to have a little fun and not destroy your budget in the process.
Q 6: Is there one specific key to successful budgeting?
Since everyone is different, everyone will have a different “key” to being successful with their budget. Most professionals will say that you need at least 2 months to really get on track but, in some cases, it may take longer. Working with a financial planner is a good idea because they will hold you accountable to your plans and goals and keep you committed to what you set your mind to.
In the end, the goal of budgeting is simply to capture wealth and usually money to make more money. In order to do that you need to closer look at how your living as well as what your plans are for living in the future. The only way to do that, as we said, is to have a budget. If you do, you’ll find that setting, and keeping, financial goals is much easier.