As discussed in previous blog posts, identifying items and goals that “spark joy” is one of the first ways you can simplify your financial life. While identifying these items and goals may be easy, they are only half the battle. Once the items and goals have been identified, many people are left wondering how they will achieve them and struggle to find the first place to start. No matter how big or small your goals, establishing a budget can provide direction and guidance on how to reach these goals in a timely manner. Below are a few items to keep in mind when creating a budget.
What are my monthly income and expenses?
Knowing how much money you have and where your money is going is one of the most important pieces of a budget. By looking at a previous month’s bank statement, you will be able to see where your money is being spent and where you could cut back. With this information, you can then determine a realistic amount that you can save to go towards your goals. You can access our “What is My Current Cash Flow?” calculator on our website to assist you in this:
What is a reasonable timeline for reaching my goal?
After you have determined your inflows and outflows, you can establish a realistic timeline for reaching your goals. Determining a realistic timeline will help set yourself up for success and will allow you to have a general idea of when you can expect to meet these goals.
Reevaluate on a regular basis:
Reevaluating at regular intervals can help ensure you are sticking to your budget. By doing this, you will catch negative trends as they come up and correct them, as needed.
Most importantly, be flexible:
While you may do everything in your power to stick to your budget, sometimes life happens. For example, earlier this year my dog, Maverick, decided to eat a couple of socks, which led to a pricey trip to the vet. I was not planning on that to happen, but sometimes life just has other things in mind. This emphasized for me again how you must be ready to roll with the punches when things do not go according to the plan. As new circumstances and expenses arise, be flexible and willing to change your budget.
At Financial Plans & Strategies we provide our clients with a budgeting tool on their client portal. This can be a great place to start to help you analyze your current spending and help you to reach your goals. Please give our team a call to learn more.