How Do I Set Up a Budget?
What is a Budget?
A budget is simply a spending plan. You have an income and need to make decisions on when and how to spend or save it. It can be a short-term plan on how to cover your monthly living expenses or a roadmap over a longer timeframe to achieve your financial goals such as purchasing a home or reaching a comfortable retirement.
Why Should I Set Up a Budget?
Financial peace of mind starts with having an actionable plan. By creating a budget, you will be able to prioritize your goals and objectives for now and into the future. The good money management habits you start today could provide financial security well into your later years.
What Should I Include in a Budget?
Income: The first step in budgeting is to know how much money you bring in on a monthly or annual basis. You’ll need to know the amount you take home net of taxes and other deductions. This can be from your paycheck, investments, Social Security, etc.
Living Expenses: Making a realistic list of your essential living expenses is crucial to having a successful budget. These would be your “needs”, and can include items like groceries, automobile costs, utilities, housing expenses, insurance, and similar necessities.
The “Wants”: The next layer of expenses may have some flexibility in your budget. These are the things that typically help you live more comfortably. Perhaps you like to travel or enjoy a hobby. You can make choices on how much to set aside for these activities. Take a realistic assessment of what is essential versus what might just be nice to have. When it comes to making sure you have more income than outflow, the “wants” are usually the first expenses that need to be cut.
Debt Expense: Another element of a successful budget is to have a plan to minimize debt expenses. Maintaining a solid emergency fund is a good first step to avoid taking out loans or using credit cards to pay for unexpected expenses. Become a savvy consumer when planning for major purchases by comparing loan rates or other buyer incentives.
Saving for the Future: Achieving a comfortable retirement starts with diligent savings. Dedicate a portion of your income to saving for retirement. Taking advantage of any employer match can also compound your account growth. Enlisting the help of an investment professional to determine the right allocation for your goals and risk tolerance can take the guesswork out of your investment strategy and chart a successful course over the long term.
Contact Professional Financial Management Today to Get Started on your Retirement Plan
You have worked hard and are looking forward to the day when you can retire. Let Professional Financial Management help you solidify your financial plan so that you can feel confident and secure. Contact us today to schedule a no obligation meeting to learn more.