August 20, 2020
Categories: Education, Tips
BY: GREENPATH FINANCIAL WELLNESS
In a time of uncertainty, many of the people we speak with find that making a budget is a powerful step to help improve financial health. Taking the time to create a simple budget helps people figure out how to meet financial goals, and weather any unexpected financial challenges that might come along. Here are three reasons why making a budget can make sense for you.
Making a budget lets you:
- Boost confidence: Even the most basic household budget has the ability to increase your confidence since you’ve taken the first step to get in control of your finances. By paying attention to monthly income and expenses, you have confidence that you can track exactly what’s happening each month.
- Help you meet goals: Looking to get through an unexpected challenge? Getting ready for a big purchase like a car? Anticipating changes in your family situation? Planning out income and expenses helps you meet these financial goals, and others that might come along. In addition, careful budgeting can help take the sting out of unexpected bills.
- Increase your awareness: It can be eye-opening when you start to track how much you spend on essential things, like bills, rent/mortgage, and food. A simple budget helps you stay on top of what you are spending. It also shows your progress in saving money or setting aside money to manage debt payments. Your budget can help you find places to save money and trim expenses.
How to Budget?
Now that we’ve explained why it makes sense to budget, how do you get started? Check out our “Budgeting 101” blog for all of the steps. As a preview, the “how-to” part of making a budget involves the following main areas:
- Capture all expenses: This step includes taking a full inventory of monthly expenses, including rent/mortgage payments, utilities, taxes, insurance, food, medicine, childcare, transportation, and other key monthly expenses.
- Rank expenses by priority: Once a full inventory of expenses is taken, assigning priority based on your values is the next step.
- Track all monthly income: On the income side, a simple budget is a vehicle to track all monthly household income and listing it out to calculate the monthly flow of income.
- Make the plan: This is the part of the process where tracking monthly expenses against monthly income reveals any challenge areas. Will the monthly budget allow for other financial goals such as building emergency savings or setting aside money for a big purchase?
Get Your Workbook
To expand upon the ideas offered here, download the Aligning Priorities Workbook which helps you make a simple plan and budget.
You’re in charge of your plan and your goals. It’s always a good idea to pay off debt and to make savings a priority (pay yourself first!) You can always adjust your goal along the way, review your budget and make adjustments to trim expenses or direct money toward something different.