Own Your Freedom with a Budget
Budget | Expenses | Income | Money | Food
Whether you use Quickbooks, Excel, or a traditional pen and paper, a budget is your fastest route to financial confidence. Simply addressing the ins and outs of your finances in a tangible format will show you your fiscal boundaries and how to navigate within the lines. The most difficult part is setting it up, but once you organize the right format, each budget moving forward becomes easier and easier.
Let’s look at the three categories that make up any budget, and go through them one at a time.
Before you can figure out your expenses you need to address exactly where all the money in comes from. This is where you list your regular paycheck, any dividends, and any secondary or passive revenue streams. It’s best to be conservative in your projections for income. If your income fluctuates prepare for the low end. That way any additional income feels more like a windfall.
Once you have a clear and conservative estimate of your income you know the boundaries you can operate within. With expenses you should prioritize their importance and note whether or not they are recurring.
A difference between the two is both rent and food are necessities, however rent doesn’t change month to month while food can be adjusted with different incomes.
Clearly defining your recurring monthly expenses will make all future budgets incredibly simple, because the numbers will already be there.
Identifying important expenses that fluctuate month to month is important because the line item will be there each month ready to adjust. If you use a program like excel you can even create a simple macro that identifies what percentage of your income goes to food, travel, entertainment, etc and it will automatically adjust when you type in your new income.
Once you’ve identified how much money your bring in and how much goes out from month to month you may have a small surplus. This surplus is just as important as your expenses. Deliberate use of money, even if it’s to deliberately save is important to maintain fiscal autonomy.
Options with this surplus are as simple as putting into a savings account, or moving to a financial advisor.
Those are three simple steps to stay on top of your monthly budget. If you have any questions please contact us we would love to grab a cup of coffee.
Any opinions are those of Jeffrey Goldfarb and not necessarily those of Raymond James.