Creating a Personal Budget – Managing a Budget – Saving & Investing, Planning, Goals, and Finance Management

Mar 31
4 min read

Effective finance management is setting up a budget, a written financial plan determining your household income, knowing your necessary expenses and unnecessary expenses, savings, and investing information.

Budgeting includes:

Household Income
Fixed Expenses
Ongoing Debt
Flexible and Unplanned Expenses
Savings
Investing

Record, Evaluate, and Adjust Expenses as Your Budget Changes

There are several steps to setting up a budget that works.

Record and evaluate all income and expenses. Be aware of every dollar spent.
Track everyday spending. Be aware of unnecessary spending. Be aware of seasonal expenditures.
Set achievable goals that are realistic, to help you make smart decisions.
Separate expenses into two categories; Needs (Necessary) and Wants (Unnecessary or can be purchased later)
Create a budget after understanding the difference between needs & wants and setting achievable goals.
Put your plan into action and save for seasonal expenditures.
Look ahead to future needs and wants. Plan accordingly and save for future needs.

There are three main types of expenses; Needs – Wants – Seasonal.

Needs:

Living Expenses –Rent/Mortgage, Clothing, Food, Electric, Water, Trash
Communication – Telephone, Internet
Travel – Gas, Vehicle Payment, Repairs, Insurance, Bus Pass, Airfare for work, Hotel for work, Meals for work.
Pet Care – Veterinarian, Food, Supplies, Groomer
Health & Wellness – Prescriptions, Doctor/Hospital, Physical Therapy, Nursing Home, Medications
Cleaning Supplies – Laundry Soap, Health & Beauty, Toilet Paper, Sanitation Supplies

Wants:

Dining Out: Restaurants, Bars, Fast Food, Festivals/Events, Hosting Parties or Dinners
Entertainment: Concerts, Movies, Amusement Parks, State/National Parks, Camping, Fishing Trips, Sporting Events, Skiing, Tractor Pulls, Festivals/Events
Gift Giving: Charitable Organizations, Holidays, Weddings, Anniversaries, Birthdays
Subscriptions: TV, Streaming Platforms, Magazines, Shopping, Hobbies

Unnecessary Spending:

Auctions
Leisure Events
Drinking Alcohol
Smoking, Drugs, Recreational Paraphernalia
Gym Memberships
Books for Entertainment, not education
Weekend Events/Stay Overs

Finance management is knowing which expenses are necessary and unnecessary is the first step to creating a budget. Now you can start to create your personal budget using these steps. Here is a template for you to use if you don’t already have one.

Step 1

Record your household income, including income from side jobs.

Step 2

List all your necessary expenses and fixed expenses for the week, month, and year. List these expenses in three distinct categories: “Necessary,” “Fixed Expenses,” and “Savings and Investing.”

Step 3

List all the other expenses in two categories; “Wants” and Unnecessary spending.”

Step 4

List the amounts for each expenditure in the column next to each type of expenditure for the week, month, and year. Create expense totals for each week, month, and year.

Step 5

Determine the income for each week, month, and year.

Step 6

Subtract the expenses from the income for each week, month, and year to determine the remaining amount of income after expenses have been paid.

Your Expenses Need to Be Less Than Your Income

Step 7

Finance management - Create a plan and achieve goals to help you stick to your budget. This will help to pay down debts and save money. Use a 50%/30%/20% rule to help you plan your budget and create goals.

50%/30%/20% Financial Planning - Achievable Goals — Financial Planning - Achievable Goals

50% - Allocate after-tax income to “needs” in your list.

30% - Allocate after-tax income to “wants”, only if your plan and goals allow for the extra income to be spent.

20% - Allocate after-tax income to “savings or investments”.

Revisit your plan and achievable goals every month or quarter to make sure you are sticking to the budget and if anything needs adjusted as your priorities change. You may need to start with a clean slate and change your plan and goals. Do not give up. Things will change as your lifestyle and spending pattern changes. Life always gives you a curve ball at times. These are called “Life Lessons.” Embrace them to keep a balance with your finances and lifestyle.

Clearly Defined Goals:

Planning and setting achievable goals are not hard. Whether you are trying to save to buy a home, repair your existing home or vehicle, college, or something else, just trying to maintain your spending habits is extremely important. Only plan goals that are achievable. Unachievable goals will discourage you and your financial planning will fail. You need boundaries and the willingness to stick to your plan to be successful.

It is important that your goals are realistic and meet specific needs. Determine your priorities and necessities before setting your goals. Plan for the unexpected such as emergencies, or repairs. Plan for repaying debts such as credit cards and loans. Once you have planned and set these goals, you will understand how much you can save for travel, college for kids or grandchildren, and investments.

Financial Planning:

Financial planning must be specific and measurable, so you can track your progress and meet your achievable goals. Planning must be relevant to your life priorities, and time-based with a clear deadline to complete your steps and goals. For example: If your goal is to take a vacation, you need a plan to save each month or year to meet your targeted cost.

Achievable is based on your financial status that is relevant to your lifestyle and priorities, which includes a timeline and deadline to achieve the targeted cost.

Measurable is to track your expenditures and progress. It is "goal specific" and needs to be achievable.

Measurable and achievable works together in your plans, goals, and budgeting needs to be successful. Having a personal advisor to assist you with your financial needs and planning is especially important.

S.R.R. Business Services offers personal advisory services to assist you with financial planning. They would like to connect with you to help you improve your finances, control your spending, pay off or down debts, and help you to improve your lifestyle. Contact S.R.R. Business Services. They respect your privacy and confidentiality. Ask for a free consultation.