In a sense, a budget is a road map marking where you are and where you want to get to financially. A good way to start when creating your budget is to plan financial goals. This can include short, mid, and long-term goals. If your budgeting goal is to be more financially stable then your goal could be to reduce your expenses and look for ways to increase your income. As another example, if you’re looking to lower your current debt your goal could be to allocate more income to paying off your debts.
Once you’ve decided on a goal for your budget, it’s time to organize it. To start off you’ll want to make a list of all your income sources. Examples of income include money from working or even funds from a student loan. Any income that is free to use over the period of time that you are budgeting for should be listed.
Once you’ve completed that you are going to want to make a list of expenses. To get a solid idea of what your spending habits are, you might need to track your expenses for a month. Luckily, there are online tools that can make this easy. Some tools can safely and securely connect to your bank accounts and track your expenses for you. Beehive Federal Credit Union provides a free service called Money Desktop to help you link all of your accounts and keep track of your finances. You can access Money Desktop by logging into your Beehive account and clicking the “Money Desktop” tab in order to track your account expenses in an easy to use and safe environment.
At this point you have set your financial goals and organized your income and expenses. This preparation is critical for anyone who wants to begin saving more or for those who are living a lifestyle that they cannot afford. Now, let’s look at where your money is going and how you could save.
Do you feel that maybe you are spending too much money in a specific area? Is too much of your budget going towards restaurants or entertainment? Maybe you realized that you are paying for cable that no one is watching or paying extra for cell phone data that is never getting used. Once you have identified these areas of excess you can make adjustments to free up money for your savings.
If you have found any unnecessary expenses you should do what you can to eliminate them. Expenses that you’re paying for, but do not need or use, can prevent frugal living. If you cannot afford a smart phone or extra data, you may have to go with a basic phone or reduce the amount of data that you pay for. Rather than paying for satellite or cable television, you could get a video streaming subscription for a fraction of the cost or watch network television which is free. Do whatever it takes to lower your expenses and meet your budget. You can also try supplementing your income with a side job, hobby or special skill.
Once you have your budget organized, you will now need to make some decisions in order to meet your financial goals. Here is an example: let’s say that this month your income is $1,500 and your expenses are $1,000. Your net income is $500. From this amount you will decide how much money is going toward your different goals. You can put $150 into your emergency funds budget to fulfill one of your short-term goals. You could also put $200 into your savings to help meet your long-term goals. The remaining $150 from your net income could be used to save for a nice vacation that you want to take in a year, a potential mid-term goal.
If we follow this example, at the end of the year you will end up with $2400 in your savings (long-term goal) and $1800 for your vacation (mid-term goal). Keep in mind that it might be necessary to make adjustments to your plan. Your income may not be the same month after month. You should also remember that it is your budget and you can use your money however you would like, but be mindful of the difference between needs and wants. The overall goal of a budget is to use it for what you have planned.
If you’re looking to save money over a long period of time a savings account is highly recommended. At Beehive we have savings accounts with competitive rates that can help you earn interest while saving for the future. We also have some special savings accounts like our Missionary Savings Account that earns a 3% interest rate and our Pocket Change Account that allows you to passively save your money and earn a 3% interest rate as well. If any of these interest you, stop by a Beehive Branch to talk to one of our Member Service Representatives to learn more and start saving.
As you continue to use your budget you may find that every month will bring different challenges. You’ll need to be flexible at times as you budget for wanted expenses and you’ll need to be willing to adapt. One month your utility bill might be higher than normal or a family emergency may require you to travel, using money you hadn’t planned on spending. When these types of uncontrollable events happen you will need to make some quick decisions. If you don’t have a budget for emergencies you may need to compensate for the unforeseen expenses by cutting back on activities like eating out or entertainment.
Avoid using your savings or taking on extra debt, unless it is completely necessary. If you are saving for something specific and you dip into those funds, you are delaying your goals. You might also have an emergency during the month and that’s when you will be glad that you saved money in your savings account. Preparation is key because you can’t see every event the future will bring. If your car needs a repair or a child requires a hospital visit, those savings will help you avoid worry. If you do find yourself having to tap in to your savings, be sure to set up a plan to replace the money you borrowed so you will always have savings for the future.
One of the hardest things about a budget isn’t the act of making it, but following it. Every time you get paid or spend money you should track the amounts on your budget. Be sure to spend within your budget limits. A budget will not work if you do not follow it.
Try keeping your budget on a piece of paper, and keep that paper nearby so you will not forget about it. Make a habit of including new expenses or different purchases in your budget so that the expenses do not get forgotten. Organize your budget in the way that works for you. As you adjust and make your budget more efficient, you will see how you can allocate your money more efficiently. Always keep in mind the main reason for your budget and that is to give you control over your money.
Whether you have never budgeted before or you are a seasoned budgeteer, here are some helpful budgeting resources.
Following these steps should help you meet your budgeting and financial goals. If you find that you need further assistance, stop by one of our branches. We’re always happy to help you and answer any additional questions you may have.