Friday, 17 November 2017
No matter where you are in your career – first job, mid-career, or nearing retirement – it's a simple truth that without a budgetary playbook, you're losing the game before you start. Good budgeting skills can make navigating your financial life a lot easier.
After all, no coach goes into a game without a plan, and in the game of life, neither should you. So how do you create a budget? Here are some tips and suggestions.
You'll be more successful with your budget if you know why you're making one. It's a good idea to take some time to think about these "whys" before you start crunching numbers.
Smart players know to listen to the experts who are, in this case, financial planners. Financial planners can review your finances and make personalized suggestions for your situation. To illustrate, here is an example of how someone might decide to allocate expenses:
Make a list of all your monthly expenses. Keeping in mind your budget allocations tally up your spending by category. You can individualize categories to fit your specific needs, such as adding a category for charitable donations or gifts.
Now, figure out what your monthly net income is, that's the total you receive after taxes and all other deductions have been taken from your paycheck.
Do a scouting report on your own budget
If there is a mismatch between your spending and your desired budget, do some homework. Dig into your spending habits and figure out where the problem is. Spend a month noting every single purchase you make. Online banking makes seeing where your money is going super easy. What's more, many online banking platforms offer robust budgeting tools. However, if you don't use online banking, here are some tips for getting a grasp of your spending:
Start small when cutting back your budget by eliminating the things you'll miss the least. Simple examples include:
These may seem simplistic, but it all adds up. The point is to establish control over your spending. Once you determine what you can, and can't, afford, your financial life will become a whole lot easier to manage.
The content provided is for informational purposes only. Neither BBVA Compass, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA Compass or any of its affiliates.
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