2022 Resolution: Mastering My Budget

Many think that having a budget means not spending money, but that’s not the case. Having a budget means being intentional with your money.  A budget is nothing more than a set of instructions that determine where your money will go so that you can achieve your financial goals.  Whether it’s getting out of debt, saving for a family vacation, or receiving new Permanent Change of Station (PCS) orders, a solid budget will get you where you need to be!

“If You Fail to Plan, You Are Planning to Fail”  ~ Benjamin Franklin

Where to Start  

Create a strong foundation with accurate financial information. It’s not an easy first step, but a necessary one.  

I. Family Meeting.  Budgeting is a family affair. Married couples and life partnerships usually include two different beliefs, strengths, and weaknesses when talking about money.  However, one person’s goals and values are no more or less important than the other’s.  Not only do you have to be on the same page with your partner, but teaching your children fiscal responsibility should be a top priority as well; this article from parents.com is a great resource. 

Those budgeting for one should have an accountability partner as well. Whether it’s a trusted friend or family member, financial advisor, or an app, it’s a good idea.

• Set your Goals. Think about what you want to accomplish financially in the next three months, the next year, and the next three years.  Write these goals down, refer to them often, and make modifications if needed.

• Make a List of Values.  Write down the creature comforts and lifestyle amenities you value in your life.  Next, prioritize what matters to you most in terms of Needs and Wants.
  • Needs are things you cannot do without – Medication, Housing, Insurance, Healthcare, etc.  These are essential expenses and should always be accounted for in your budget.  
  • Wants are things you will survive without – Cable, take-out, entertainment, etc.  These expenses can be taken out or added to your budget as your income allows.

II. Determine Your Expenses.  Where is your money going? Take a deep dive analysis of your checking account statements, credit card statements, and everything you spend money on regularly. The crucial steps of determining monthly expenses require accuracy. 

Personal finance trackers with expense calculators can be found in App stores, banking and financial websites, credit-repair websites, or PC software programs. Research to find the program that works best for you.

• Fixed Expenses.  Expenses that are the same amount each month. Rent or mortgage payments, auto or student loan payments, etc.
• Flexible Expenses. Expenses that vary from month to month.  Food, utilities, entertainment, etc. 
• “Heavy Month” Expenses:  Expenses that are billed quarterly, semi-annually, or yearly such as taxes or insurance.  Things like back-to-school shopping, routine car maintenance, birthdays, and holidays will need to be expected and accounted for accordingly.  (Hint: Christmas is on December 25th every year!)  
• “Surprise!” Expenses: Always expect the unexpected!  Car repairs, home repairs, and Veterinary emergencies can be stressful if you haven’t prepared ahead of time.

III. Understand Your Income.  Figure your available monthly income (the amount of your take-home, or net, pay).  Do not include overtime pay, bonuses, or the verbal raise that your superior keeps promising.

Create Your Budget

Now that you have done the work to set up the foundation, the next step is easy!  Several resources and programs online help with the basic income over expenses equations. 

I. Your Income minus Expenses should zero out each month.  This does not mean you have zero dollars!  It means that you have directed your cash flow with intention and accounted for every dollar you will spend.

• Money left over should be allocated towards the goals you and your family set: getting out of debt, saving for a family vacation, or a little extra spending money.

II. Expert advice varies on what you should spend your money on, how much you should save, and how much you should donate. These theories have merit; however, they might not work for everyone because not everyone values the same things.

Check Your Budget  

Review your budget every month.  Does the plan still meet your needs and help you achieve your goals?  If not, make adjustments or create a new budget that better meets your needs.

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