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Money Management: How To Create a Budget That Works For You

August 3, 2021

When it comes to money goals and what a bright financial future looks like, it varies from person to person. For most, they just want to feel financially “comfortable,” and not have to worry about if they can pay their bills on time, while also having money left over. For some, retiring early is what they are working toward. Regardless of what your financial goals are, one of the fastest ways to get there is through budgeting.
Budgeting your finances can feel stressful and even overwhelming, which is why many people avoid creating a budget. In fact, a recent survey conducted by The Penny Hoarder, showed more than half of Americans do not budget. Similarly, a study conducted by Statista showed that the United States has the second highest rate for household debt in the world. Some experts say budgeting improves quality of life by reducing stress, building confidence, and eliminating arguments.

The important thing to keep in mind when creating a budget is that budgeting is a process—a personal one at that! Don’t hesitate to seek guidance or turn to resources that are available to help you on your budgeting journey. Go into it expecting trials and errors, changing directions, and strategizing along the way.  Centier To You’s new  budgeting e-course includes a  printable worksheettips on creating a budget that works for you and how to track to it, and a personal finance tutorial video. Centier Bank clients also have access to a  money management tool available in online and mobile banking as well. Clients can also schedule a free, seasonal  financial checkup at a Centier Bank branch to get help and guidance.

Now that you know where to go to help you organize your budget, let’s talk about how to fill it out. Here are some steps to get you started. First, you want to assess your monthly income. Document any and all income including your paycheck, side work, and any other earnings. Just like every dollar you spend makes a difference, so does every dollar you bring in. If you earn commission, yearly bonuses, and know you are going to receive an annual salary increase, implement that into your budget. By accounting for every dollar, you can see exactly how much money you have to spend, which is essential when ensuring you are living within your means.

Next, look at your fixed monthly expenses and start from big to small. Printing off your bank statements to use as a helpful guide is one way to check for habits, trends, and average dollar amounts. For example, you might begin your list with rent/mortgage payment, car payment, utilities, gas, insurance, cell phone, and groceries. You can then add in loan payments, like student loans and credit card payments, which will ensure you are keeping your loan in good standing while also working toward eliminating the payments from your monthly spending.

Additionally, you’ll want to add in any one-time annual expenses like school expenses, memberships, car registration, etc. and divide those amounts by 12 to account for them in your monthly budget. If the line-item amounts vary from month to month (i.e. utility payments, credit card payments), then make sure the dollar amount associated with these expenses is on the higher end, just as a buffer.

It is important to note which expenses are fixed expenses, or ones that will not change in value from month to month. It makes budgeting for those categories much easier because you can plan for the exact amount needed in that situation. For the categories that may fluctuate from month to month, such as gas, utilities, or credit card payments, it is always better to over-estimate a planned expense to ensure you have the available funds. So, if you choose to spend $300 on groceries for the month, and only spend $250, that is $50 surplus (or extra) money in your monthly budget. On the contrary, if you choose to spend $350 on groceries for the month, there will be $50 less in your budget. This extra money you are not spending can be rolled over into next month’s budget or moved to a savings account.

The next step in creating a budget that works for you is to categorize your expenses. Categories might look something like this: Housing, Life, Transportation, Debt Repayment, Savings. Entertainment is a category that some people may choose to omit in their monthly budget planning, but last-minute opportunities, dinners out, and trips to the movie theater should all be accounted for as well. Don’t fool yourself into thinking you won’t be spending money on entertainment—it is best to build entertainment into your budget so you can stay on track and not have to scramble after the fact.

Examine your numbers. Is the amount you’re bringing in greater or smaller than the amount of money you are spending? If necessary, examine areas where you can reduce expenses. Are you using the monthly gym membership you’re paying for? Can you get a lower car insurance rate with another company? By creating a budget that works for you, you’ll be in the “driver’s seat” when it comes to your money and on your way to your financial destination. Track your spending and record your progress. And if you get off course from the original budgeting plan, reassess and optimize your budgeting strategy for a better outcome.

The benefits of budgeting far outweigh the consequences of the daily discomfort centered around financial stress. If you need to be motivated to create a budget, consider budgeting an essential step to achieving your financial goals and working toward a bright financial future.