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Building a Budget That Works for You
January 15, 2020

Building a Budget That Works for You

When it comes to setting goals for the new year, a lot of people commit to getting their finances in order. Whether that means creating a budget, setting aside money for savings or investing for retirement, it is easy to be overwhelmed thinking about your financial big picture. This edition of TRIO offers three steps to help make budgeting a little more manageable.

1. Know What You’re Working With

The first step of building a budget is making sense of your income and expenses. Without knowing how much money you are bringing home each paycheck, it will be impossible to know how to spend it smartly. Once you know how much money you have, you can start to assign how you’re going to spend it. If you’re new to the budgeting concept, your second step might be to track your expenses. A few dollars here and a few dollars there add up over time. Take a look at the last two months to understand where your money is going. Once you see your expenses, it might be easy to identify where you can cut back. If you want to compare how you’re spending your money with those around you, a spending analysis tool helps bring focus to your financial goals.

For a lot of people, using the word budget brings negative thoughts. Budget guru Dave Ramsey challenges this thinking and reminds us that a budget is really just telling your money where to go. To help with this process, Dave’s team developed the EveryDollar app to help you track spending. Budgeting doesn’t have to be that fancy – my budget is on an Excel spreadsheet. If, however, if you want to go digital with tracking your dollars, Mint is another excellent budgeting app. Unlike EveryDollar, where you have to input your expenses manually, Mint is connected to your bank account. For more digital budgeting options, check out The Best 8 Budgeting Apps of 2020. Just remember that it doesn’t really matter how you decided to build your budget, the most important step is that you’re doing it!

2. Get a Specific Goal

When it comes to saving money, it’s essential to be specific with your goals. It’s easy to say, “I want to save more money,” and leave it at that. But, if you aren’t specific about what you want your financial goals to be, how will you know if you’ve been successful?

Most money experts will encourage you to set specific short-term and long-term goals. The short-term goals should take a year or less to achieve. For instance, if you’re new to saving, an ideal short-term goal might to be to set up an emergency fund. Most experts will say it’s smart to have three-to-six months’ worth of expenses saved. For many people just starting to save, that’s overwhelming to think about. Matt and Joel, with the How to Money podcast, recently shared that economists recommend $2,467 as an ideal minimum savings goal. Dave Ramsey, on the other hand, encourages everyone to have $1,000 in savings while they are getting out of debt.

Long-term savings goals focus on the bigger picture, and they generally take five or more years to reach. Think down payments on a house, college savings or retirement. Long-term goals will take years to achieve, but starting them is the key. For many people, long-term goals are best met by breaking them down into smaller goals. As an example, if you want to pay your mortgage off early, you might decide to make one or two additional house payments a year. Rather than making one extra payment of $2,000, you might want to make 10 extra payments of $200. The same concept can be used with saving more for retirement or college. Finding ways to break down your bigger goal helps you see how small steps add up for big impact.

3. Adjust as Needed

Budgets are not an example of “set it and forget it.” The budget you create today may not be the budget you need six months from now. As your financial situation changes, so should your budget. Scenarios where it’s essential to adjust your budget include a change income, bills fluctuate or you consistently overspend in a category. Remember, a budget only helps if it works!

Some financial experts recommend a monthly budget check. Others suggest a checkup every couple of months since it often takes time to recognize spending patterns. No matter what timeline you decide, reviewing your budget allows you to make decisions based on what works best for you and your goals. Not sure where to start? This site has a helpful worksheet to keep your budget up to date.

If you’d like to know more about success when it comes to personal finances, sign up for our short course, Your Money Personality. This class will focus on the attitudes and habits surrounding money that make up your money personality. Insights gained from this class can help you change your financial behaviors to reach your financial and life goals. To register call 405.377.3333. To find out about more courses like this sign up for our monthly e-newsletter. View all of our upcoming courses in our digital catalog.

Cara Adney is the Marketing and Media Relations Coordinator at Meridian Technology Center.

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