Getting a handle on how much money comes in and goes out of your household is essential to reaching your financial goals. First, you can begin by organizing your financial records to determine how much money is coming in and where it is going. Next, categorize your expenses into three groups: regular payments such as mortgage payments, essentials that can be reduced such as clothing, and nonessentials that can be decreased or even eliminated like entertainment.
Once you put each expense into its category, you can better analyze which items can be reduced so that you will have more money available for saving and investing. Establish a realistic budget for your living expenses. Keep the following points in mind when doing so:
- Make the budget flexible. Nothing goes exactly as planned, and your budget should be able to deal with emergencies.
- Use consistent groupings so that you can compare your budgets over time.
- Don't try to be too precise. You don't need to account for every dollar spent. Give everyone in your family a reasonable personal allowance, and let them spend it without accounting for it.
- Your budget shouldn't be a dreaded exercise, but a tool that helps you strive toward your financial goals. So keep it short, simple, and easy to understand and implement.
Call if you'd like help with your budget.