Do you have a monthly budget? Creating a monthly household budget is a critical step in ensuring your financial success. Understanding how much money you make and all your expenditures (both fixed and variable) can help you make informed financial decisions. Whether you know you are doing well or vice versa, a budget can greatly benefit you. Without understanding all aspects of your financial picture, it is not possible to see areas you can improve and potentially save more money.
How do you go about creating a budget? Well it is quite simple, but requires some time for you to sit down and analyze your spending habits. Here is how the team at Miles Tax Advisory recommends you create your financial budget.
- Recording Platform – Determine how you will keep track of all the information in your budget. You do not need fancy software to create a budget for your household. In fact, the age-old method of paper and pen work just fine. If you want to fancy up your budget a little, consider using Microsoft Excel (especially if you are a proficient user).
- Determine Your Income & Expenses – Your finances are separated into two key components: (1) income and (2) expenses. When determining these components, ensure you are capturing all aspects of both. Remember, your budget is only as effective and accurate as the information you put into it. Revenue should include your salary / hourly earnings, any bonuses you receive, payment received from side-gigs, etc. Expenses should include fixed and variable expenses. Capture your mortgage and car payments, of course, but make sure to include groceries, credit card bills, etc. as well.
After creating your budget, analyze it. Use it for 2-4 months and track your spending habits. Learn where your hard-earned money is going. Is there anywhere that maybe you are spending too much? Compare what you bring in and what you spend. Are you spending more than you earn? Even if you are doing well, you could always do better. Consider taking the following steps after analyzing your budget:
- Create Achievable Goals – Create a goal. Maybe you want to save more. The most important thing to remember is that you need to make your goal achievable. Ensure that your goal is realistic for your current situation. Individuals have more daily control of their expenses than their income, so try to focus on areas you can save.
- Maintain Your Progress – Continue to track your progress and ensure that you are adhering to the goals you set yourself. Maybe a goal that you thought was realistic is not actually feasible. It is alright, just create a new, more realistic goal.
Do you need more help creating a personal budget for yourself? Reach out to the Miles Tax & Advisory team for assistance.