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How to create and maintain a budget

Tracking expenses and following a budget may seem to be a painful experience but is a foundational step toward reaching financial goals such as paying off student loan debt, buying a home, saving for the future and investing in retirement. According to a recent study by U.S. Bank, only 41% of Americans use a budget even though it's one of the most effective ways to keep track of your finances.

Why does it so seem painful?

  • Tedious and time consuming
  • Makes us accountable for our actions
  • Requires discipline to stay on track

 What is a Budget?

 A Google search for budget brought up this definition “an estimate of income and expenditure for a set period of time”

 Let’s use this as a starting point and focus on the word “estimate”. We need to estimate our weekly, monthly and yearly spending in order to determine what and whether we can do something in the future. Use the budget as a comparison tool to make periodic changes in order to accomplish a goal.

 Where to start?

1. Get in the right mindset

  • Don’t do this to beat yourself up. Use this as a starting point to take control of your finances, celebrate your victories and/or make changes to get where you want to go.

 2. Know where you stand

  • Create financial statements
    • Net worth statement
    • Statement of cash flows

 3. Estimate your expenditures

  • Look at past expenses (use previous years bank statements) and predict known future expenses.
  • Determine what you will need to meet present and future expenses
  • Look at statement of cash flows and net worth to determine resources needed to accomplish your goals.

 4. Monitor expenditures and make required changes as needed.

 Is that it?! Sounds easy, but the devil is in the details. Hopefully this has been helpful! 

 Stay tuned for future guides for academic and healthcare professionals to help them take control of their money. Next guide will share techniques, resources and software to help with budgeting.

 

Want to get serious about taking control of your money and need?

Do you and your spouse have the same opinion about spending and goals?

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