We have all done it. We set a goal and get off to an ambitious and determined start. Then life happens or the excitement wears off and we begin to lose focus on why we set the goal in the first place. While all goals are important, setting and following through on your financial goals can have a lasting impact on your future. This starts with creating a budget, one you can actually follow.
The first step is to figure out exactly how much money you bring home each month, your net pay. Stick with your base pay and don’t include any overtime or bonuses. Those aren’t guaranteed and your budget should be reflective of that. Next, make a list of all “must pay” expenses. Include rent/mortgage payments, child care, estimated monthly utilities, insurance, estimated grocery costs, and other loan payments. Now compare the two. How much money is left after you pay these expenses? If your monthly expenses are greater than your income, it is time to evaluate the situation you are in and make changes. This can lead to tough decisions but your financial position is not sustainable in this scenario. The amount of income left after your expenses is your disposable income, what you can spend or use for other things.
Just because we call it disposable income, doesn’t mean you should throw it away.
The first thing you should do is determine how much of that you can save or pay down debt with. This will only lead to greater financial strength in the future. Now, set yourself an allowance with the remainder. Determine how much you are going to limit yourself to spending on fast food, shopping, splurges and hobbies. Consider opening a separate account for “must pay” expenses and keep your allowance or disposable spending funds separate. This allows you to be aware of how much and what you are spending your money on to make necessary adjustments. Awareness is key. If you stay aware and avoid impulse spending, stop and think before swiping, budgets aren’t so hard to follow. Just do your homework.
Chief Credit Officer | [email protected] | 502-348-3911