Building a Budget That Works

Building a budget that works: Your Path to financial success

Building a budget that works for you is one of the most important steps you can take to achieve financial stability and reach your goals. A truly effective budget balances financial responsibility with your lifestyle needs.

💰Step 1: Determine Your Net Income

Calculate your monthly income after taxes. Be sure to include income from side hustles, tip income, and any other income.

If you are self employed, don’t forget to account for taxes you’ll owe on this type of income. TaxAct has a self employment tax calculator which will help estimate your tax obligations.

📊 Step 2: Know Your Spending Habits

Before you begin building a budget that works, you need to know where your money is going. This means tracking your expenses, no matter how small.

Make sure to include large expenses that may not occur every month. Things like property taxes, insurance payments, vacations, Christmas, etc. Estimate the annual cost of and set aside a monthly amount for these type of expenses so you’re ready when the payments are due.

Use one of these methods:

📱 Budgeting apps like Monarch Money, EveryDollar, Quicken are relatively easy to use and can connect with your accounts to simplify the process

📑 Spreadsheets can be effective if you’re organized and diligent with your receipts

📓 Notebook for those old school folks who prefer pen and paper

How you track depends on your personal preference. Just start tracking so you have a basis to start from. You might be surprised at what you discover!

🤝 Step 3: Get on the Same Page with Your Partner

If you’re in a relationship, it’s crucial that you and your partner are aligned on financial goals and spending habits. Money can be a major source of conflict in relationships, but it doesn’t have to be.

Action item: Schedule a “money date” with your partner to discuss your financial goals, concerns, and habits. Make it a regular occurrence, perhaps monthly. Be sure to discuss both necessary expenses and discretionary spending.

🎯 Step 4: Tailor Your Budget to Your Lifestyle and Goals

There’s no one-size-fits-all approach to budgeting. Your budget should reflect your unique lifestyle and financial goals. Are you saving for a house? Planning for an early retirement? Paying off debt? Your budget should support these objectives while also allowing for some flexibility.

Action item: Write down your short-term and long-term financial goals. Then, allocate your income accordingly in your budget, making sure to include categories for both necessities and discretionary spending.

💡 Pro Budget Tip

Focus on paying off credit card, car loans, personal loans, and any other consumer debt as quickly as possible. You’ll be amazed how quickly your net worth will increase when you eliminate your debt service payements

🎉 Step 5: Set Yourself Up for Success.

A good budget isn’t just about restriction—it’s about empowerment. Include some discretionary funds in your budget to avoid feeling overly constrained. Also, automate your savings and bill payments where possible to make sticking to your budget easier.

Action item: Set up automatic transfers to your savings account on payday. Start small if needed—even $20 a week adds up over time.

💡 Smart Budget Strategies

Automate Your Finances

* Set up automatic bill pay

* Create automatic transfers to savings

* Use direct deposit to separate accounts

🔍 Step 6: Regularly Review and Adjust

As your life circumstances change, so should your budget. Regular review ensures that your budget continues to align with your goals and needs.

Action item: Schedule quarterly budget reviews. Assess whether your current allocations are working. Are you meeting your saving goals? Is your budget sustainable? Adjust as necessary.

🏋️‍♂️ Step 7: Bounce Back When You Fall Off Track

Nobody’s perfect, and there will likely be times when you overspend or forget to track an expense. The key is not to let these slip-ups derail your entire budget. Instead, view them as learning opportunities.

Action item: When you go over budget, don’t beat yourself up. Instead, analyze what happened. Was it a one-time expense or a sign that your budget needs adjusting?

If you’re having trouble staying on track, try switching to cash for items like groceries, clothing, dining out, and miscellaneous shopping.

Use the Envelope System

How It Works

1. Create labeled envelopes for each spending category

2. Fill with cash when you get paid

3. Once empty, stop spending

4. Limit borrowing between envelopes

Final Thoughts

Remember, budgeting is a skill that improves with practice. Be patient with yourself, celebrate your progress, and keep your eyes on your financial goals. With time and consistency, you’ll master the art of budgeting and pave the way for a secure financial future.

By creating a budget that addresses both your financial goals and your lifestyle needs, you’re setting yourself up for long-term success. A balanced approach ensures that you can maintain your quality of life while still preparing for the future. After all, the ultimate goal of financial planning isn’t just to save money—it’s to create a stable financial foundation that supports your life goals, both now and in the years to come.

8 Money Tip's for Your 20's

Your 20’s are an exciting and transformative time in your life. It’s a period of self-discovery, personal growth, and building the foundation for a successful future. While many financial advice columns emphasize the importance of building credit, this article will focus on alternative steps you can take in your 20s to secure your financial future without heavy reliance on credit. By adopting these strategies early on, you can pave the way for a more stable and prosperous financial journey.

1. Educate Yourself about Personal Finance

Take the time to educate yourself about personal finance. Read books, attend seminars, or follow reputable financial websites to understand investment strategies, budgeting techniques, and financial planning. Knowledge is power, and by equipping yourself with financial literacy, you’ll make informed decisions and avoid costly mistakes.

2. Minimize and Manage Debt

While we’re focusing less on building credit, it’s important to address debt. Minimize and manage any existing debt responsibly. Prioritize high-interest debts first, such as credit cards, and develop a repayment plan. Avoid taking on unnecessary debt, and be mindful of living within your means. Managing debt effectively will alleviate financial stress and pave the way for a more secure future.

3. Invest in Your Retirement

While retirement may seem far off, investing in your retirement savings early has significant long-term benefits. Consider contributing to a retirement account, such as a 401(k) or an IRA (Individual Retirement Account), taking advantage of any employer matching programs, if available. By starting in your 20s, you can benefit from compounding returns and grow your nest egg over time.

4. Create a Budget and Stick to It

One of the most crucial steps to secure your financial future is to create a budget. Track your income and expenses diligently, categorize your spending, and set realistic savings goals. By living within your means and saving consistently, you’ll develop good financial habits and avoid unnecessary debt.

5. Establish an Emergency Fund

Life is unpredictable, and unexpected expenses can arise at any time. Building an emergency fund is paramount to financial security. Aim to save at least three to six months’ worth of living expenses in a separate savings account. This fund will act as a safety net during challenging times, preventing you from relying on credit cards or loans.

6. Invest in Your Skills and Education

Investing in yourself is one of the most valuable investments you can make. Consider advancing your education or developing new skills that align with your career goals. Increased knowledge and expertise can lead to higher earning potential, job security, and improved financial stability in the long run.

7. Diversify Your Income Streams

Relying solely on a single income source can be risky. In your 20s, explore opportunities to diversify your income. This can include freelance work, part-time gigs, or even starting a side business. Generating additional income will provide you with more financial flexibility, help you save and invest more, and reduce your reliance on credit when unexpected expenses arise.

8. Protect Yourself with Insurance

Insurance plays a vital role in securing your financial future. Explore options such as health insurance, life insurance, and disability insurance. Though it may seem like an additional expense, having appropriate coverage ensures that unexpected events don’t derail your financial stability and long-term goals.

Conclusion

Building a secure financial future in your 20s goes beyond just focusing on credit. By taking these key steps, you can lay the groundwork for long-term financial stability and success. While it’s natural to make mistakes along the way, these challenges will test your determination. However, with discipline and resilience, you’ll be surprised at how quickly your financial position improves!