Budgeting is a plan that is created on how you will spend your money and also save your money. You can have a budget set for the month, or quarter or for the year. The goal is to stay in the budget so you can meet your financial goal.
Budgeting also helps you manage your finances better by making sure you are not overspending and also saving money. Budgeting also helps you see whether or not you are overspending if you are and how you can better manage to reduce the expenses.
Budgeting also helps you see if you are spending money in the necessary areas or just splurging your money on areas that are unnecessary.
In order to start a budget, start with writing down all the money that you receive each month from every income source. That is your total income for the month.
Next you will write down all your expenses, but you will separate them into two categories: Fixed Expenses and Variable Expenses
Fixed expenses are those that you have to pay every month and the same amount every month such as your rent or mortgage, care note, insurance, utilities.
Variable expenses are those such as groceries, medical expenses, dining out or entertainment. These expenses change and are variable depending on each month.
Start categorizing your expenses into similar groups such as housing, transportation, food, savings, and entertainment.
Set spending limits on how much you want to spend in each category based on your income, priorities, and savings. You can also set an amount of saving that you want to make and deduct that amount and then see the amount that you have available to spend for your priorities.
By creating spending limits, you can oversee how much you are going over the budget and see how you can adjust it. This also helps others in recognizing if they need to bring additional income in. It can also help you understand how you should manage your finances better.
You can find many online templates or utilize Budget templates to help you create a simple plan for the month. At Karstens Wealth we are eager to guide you in your financial budgeting and planning. Visit our website at www.karstenswealth.com
While budgeting is for short term or for a monthly basis, Financial Planning is about setting long term planning. It’s about creating a strategy to achieve your long-term goal. Financial planning also involves looking at the bigger picture and preparing for future expenses or saving and investing.
Setting a clear goal and understanding what you want to achieve with your money. The goal can be for paying off a debt or going on a vacation. Some people plan for retirement plan or saving to buy a house.
Once a clear goal is established, look at your current budget to understand your income vs your expenses, savings vs debts. This will help you see where you stand financially.
Creating a plan to put money aside regularly for a short-term emergent expense will help you stay steady on your goal. This will prevent you from going off track and pulling money from other sources.
Putting money to grow overtime through investments such as stock and bonds or real estate. These types of investments will limit you from accessing funds immediately but will grow over time.
Reducing what you owe or paying off any debts you have will free up more income for you to save or to invest in.
Regularly review your plan and budget to make sure you are on track and adjust your budget and plan if the goals change. For example, some set the goal for a trip but then there is a change in plan where the couple is now expecting a new arrival…goals now change.
Remember to be realistic and when setting the budget and financial plan, make sure they are achievable.
Prioritize the needs over the wants. Focus on what is an important and essential expense and then allocate the money for the wants.
Using tools for budgeting such as budgeting apps or spreadsheets can help keep track of your finances easily. This will also keep you disciplined or can help you stick to your plan.
Review the progress regularly at least once a month to make sure nothing is missed or needs adjustment.
This will help you have better control over your finances, help you make informed decisions. It will reduce your stress and keep you prepared for any financial surprises. Most of all, it will help you achieve your goals with a clear plan in place.
If you have more questions or need expert review, Karstens Wealth Management conducts a review of the financial situation to determine first whether you need Karstens Wealth Management services, and only then, how to best fulfill that need. For questions, talk to Jake at Karstens Wealth at 833-657-8400 or visit www.karstenswealth.com